There's probably nothing worse in the home buying process than going through the home loan application, finding the home of your dreams, submitting and accepting an offer only to have your finances fall through at the end of the transaction. On occasion, this has nothing to do with the buyer but usually, the buyer has something to do with it. You certainly don't want to sabotage your home loan once you found the home of your dreams. And you certainly don't want to frustrate the seller by having them start all over again with the new buyer.
Instead of telling you what not to do, I'm going to tell you the ways that you can sabotage your home loan and of course, what you want to avoid in order to get the home of your dreams.
Once you've been approved for a home loan you want to put an offer down on the property. Once an offer is mutually accepted you'll need to submit earnest money in order to "hold" the contract under your name until closing. All of these steps usually happen after mutual acceptance has taken place.
You really don't have the money to cover your earnest money deposit.
It's rare that it can happen that buyers want to "float" their earnest money check. The problem with this is that they don't know when it will be deposited and it has to be real money behind the check. If you write a $3000 earnest money check just to impress the seller but don't actually have the money to back it, your earnest money check will bounce and the contract will probably get rejected. Make sure you have the actual funds to back up your earnest money deposit in order to help the process move forward.
Apply for credit after mutual acceptance.
If you go out and apply for credit either on a car loan, additional home loan, home equity line or even several credit cards after your offer is accepted, it can seriously sabotage your ability to receive financing at closing. Making large purchases, taking out additional credit lines, or messing with your credit history too much during the purchase and sale contract can seriously affect your interest rate or even the ability to obtain the loan at all.
Read more: How Hard is it to get a Home Loan Now?
Quitting your job.
Regardless of what you're going to do after you've closed, quitting your job now is one of the worst things you can do. Lenders and banks want to see a stable job history and if you quit and are unable to make your mortgage payment before the property closes, lenders will most likely reject your financing altogether. Hang on to your job and even if you plan on moving to another job in the same industry, it's best to do so after closing. Don't make any major financial or lifestyle changes during the transaction.
Spend all your money on new appliances or furniture for the house.
If you have a little bit of extra reserve funds set aside it's best not to touch those until after closing. If lenders approve your home loan based on the amount of assets you have but then by closing you have none, it can cause a large red flag on your credit history and possibly deny your ability to have a home loan at all.
Read more: How Much Money Do I Need to Buy a House?
Bottom line: it's best not to make any major financial and lifestyle changes during the time that you made the offer up until closing. Any changes can really affect your ability to get a home loan or at the very least will affect your interest rate.
Related Post: What if I Can’t Get Financing?
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