Are you looking to buy a house but are worried about losing your loan? In this episode of Rescue Me, we're going to talk about things you shouldn’t do before or when you’re in contract to buy a house. We’ll look at why a few small mistakes could cost you your loan and discuss 6 rules to avoid them.
How Not To Lose Your Loan
There are a few things that could cost you your loan, and many of them may surprise you. To avoid any last-minute surprises, follow these key rules
Rule #1: Don’t deposit large sums of money into your account unless you speak with your lender first. Lenders have to source the monies that are coming into your account. They have to track everything and figure out where all the money is coming from. We're not saying you can't put money into your account, but you have to let the lender know so they can track the funds.
Rule #2: Don't make any large purchases. This includes things like buying a car, furniture, or appliances for your new house. Doing so can affect your credit scores and whether or not you still qualify for the loan. I have had buyers go out and buy $2,000 worth of appliances by opening up a new credit card. In doing so, they lost their loan in the middle of a transaction because they didn’t inform their lender. Again, always consult with your lender if you're making any big financial purchases during an escrow.
Rule #3: Don't co-sign on loans for anyone else. While it might be that you're trying to help someone—and chances are you'll never have to make any payments on that loan—it will still count against your credit. So please, do not co-sign any loans for anyone just before or while you're in escrow.
Rule #4: Don't change bank accounts. Very similar to putting large sums of money into your account, the lenders have to track everything. If you're changing bank accounts, it makes things very difficult for them to track. So wait until after your purchase, and then you can change banks if you're not happy with the bank you're with.
Rule #5: Don’t apply for new credit. Typically what happens with buyers is that they're very excited, and they want to go out and start buying appliances and getting things ready for their new house. They may get a great deal from one of the big box stores that says: "If you open up this credit card account, we're going to save you 20%." It sounds great, but it's a new line of credit that can affect your credit score. It could also affect your debt to income ratio and knock you out of qualifying for your loan. Don't do it.
Rule #6: Don't close any credit accounts. I know this rule sounds backward. You might be thinking, "I have five credit cards. What if I close two or three of them? It makes it look better." In actuality, it doesn't. Keep those accounts open, talk to your lender, and they'll guide you through what to do.
Consulting Your Financial Lenders
The bottom line is that if you're doing anything financial right before you're going to buy a home or during an escrow, always consult your financial lenders. They'll let you know what you can and can't do as well as what things are okay. They’ll also look out for things that could cause you a problem later down the line.
If you have questions, please reach out as I'm always happy to help. If you're thinking of buying a house and you don't have a lender, give me a call. I have great lenders I've been working with for 15 years because they do their job and they're very good at it. And remember, when you use me to buy a house, not only will you get a great home but you'll also be helping a dog get out of the shelter and into their new backyard.