Closing on your new home can be an exciting but stressful process. There are a number of moving parts that you need to be concerned with to make it all work. In order to make the process less stressful be sure you don’t make these four common closing mistakes which could cost you the home of your dreams.
If you think you might be switching jobs at any point during the closing process, you will want to talk with your lender as soon as possible. They will inform you what you need to do in order to keep the process moving and to make sure you have the right paperwork. Lenders become concerned even if you are making the same amount or more at this new job, as this situation places them in a blind spot as it relates to you your income. Without information like pay stubs to back up the change, your application could be delayed or cancelled.
Buying Furniture Before Closing
It is no surprise that furniture is expensive, and most likely needed when moving into a new home – especially if it is bigger than where you are now. Because homebuyers are excited about their new place and want to be settled as quickly as possible, some choose to go out looking for furniture before closing. Be warned: this can cause problems with your finances regardless of whether you buy it with cash or use credit to purchase it. Buying big-ticket furniture pieces can force you to spend money from your reserves or it can alter your overall debt-to-income ratio. This change can raise red flags for the lender, in turn making the closing more difficult.
Leasing or Buying a New Car
This is not the time to make a new car purchase. You want to be focusing all of your finances on purchasing your home. Lenders will become concerned as they will these extra payments as potentially meaning you won’t have enough money to afford your monthly mortgage.
Using Money you Don’t Have for the Closing
You may get a better deal if you are able to put at least 20% of more down. However, if you don’t have this money it is important that you seriously consider the consequences of taking out a line of credit to get that down payment. This once again will negatively affect your credit check because you will need to pay this money back.
When buying your home you need to be smart with your finances before and during the process. Remember: you don’t own the home until you have signed those papers. This means the banks can, and will, continue to monitor you until this purchase to make sure no closing mistakes pop-up in between.