I’m Closing on a Mortgage Soon So I’m Absolutely Making Sure to Avoid These Financial Moves

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I want to make sure my mortgage loan goes off without a hitch. Read on to learn what I’m taking care not to do until after closing. 

I’ve been in the process of trying to buy a home for several months. I finally found a property, made an offer, and had it accepted. But I had to agree to a long closing, because the sellers had a tenant living in it.

Since I have been fully approved for a home loan and I am now just waiting on my mortgage to close, there are a few key things I’m making sure not to do so I don’t mess up the chances of actually getting the financing for my new home on closing day. Here’s what I’m avoiding.

1. Opening up any new lines of credit

I am making absolutely certain not to apply for any new kinds of credit prior to my closing. This means I won’t apply for a credit card, personal loan, or anything else that would require a credit check.

There’s a simple reason for that. My lender checked my credit when I applied, and will check it again right before the home loan closes. If there are no changes, then my closing should go ahead as scheduled.

But, if my lender spotted an application for new credit, I would have to explain it — and the loan would need to go back to underwriting to make sure I was still eligible even with the new debt. That’s because lenders look at your total debt, relative to income, when approving you for a loan. Applying for new credit would change this calculation.

If you are waiting to close on a mortgage, do not borrow money for any reason. Don’t finance movers or a furniture purchase. Wait until after you close to avoid potentially derailing your loan.

2. Charging too much on my credit cards

I’m also avoiding charging too much on my credit cards for the same reason that I won’t open any new credit. Although I pay off my credit cards in full every month, the card issuer sometimes reports my balance to the credit bureaus before my payment has cleared so it looks like I owe money.

If my card balance is higher, this could also impact my debt-to-income ratio and thus adversely impact my ability to close on the loan. If you don’t want to risk your DTI being higher and your loan potentially being sent back to underwriting — or even getting denied if you were close to your lender’s DTI limits — keep the cards put away in the period between loan approval and closing.

3. Taking too much money out of my bank account

My mortgage lender required that I have several months of reserves in order to get approved for the loan. Reserves are liquid assets set aside that you could use to pay the monthly mortgage payment if you lost your income.

Since I’m self-employed and borrowing a good amount of money for a second home, my lender wanted to make sure I had enough funds available to cover the principal, interest, taxes, and insurance on the home for four months. It will be checking my bank statements and brokerage account statements again before closing to ensure that money is still there.

If your lender has reserve requirements, you don’t want to let your account balances drop before closing to the point where you can no longer meet those mandates. You also want to be sure you don’t take money out of your bank account that you need for your down payment or closing costs.

By avoiding any moves that could make your lender think you’ve become a riskier borrower, you can ensure you don’t jeopardize your chances to close on your home on time. Basically, just try to keep everything in your financial life as stable as possible before closing on your home, as mortgage lenders tend to get nervous if you make changes after they’ve pored over your financial details to get you qualified for your home loan. And the last thing you need is a nervous lender as you head into closing!

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