Mortgage applicants need to avoid any major changes in their financial circumstances at all costs. Getting a new credit card or auto loan can severely affect underwriting and delay or ruin a borrower's closing transaction.
Even spending available credit on your credit cards to buy things for your new home, like appliances, tools and yard equipment can affect a closing. Consider paying cash for everything. Mortgage approval is based partly on debt-to-income ratio, so if your credit card payments go up and the ratio of payments to income is too high, you could ruin the chances of getting final approval on your mortgage.
In the final stages of closing, a lender will check credit for new credit accounts or check to see if an applicant has acquired an auto loan since the loan application. Even applying for store credit cards are a no-no.
Retailers often offer discounts to customers who apply for store credit, but even opening a store credit account without charging anything to it can be detrimental to your financial status with a lender. Make no mistake, lenders will recalculate debt-to-income ratios just before closing. Therefore, if you are in the process of buying a home, consider waiting until after closing to finance purchases such as furniture, a refrigerator or new flooring.
A shopping spree could upset your debt-to-income ratio, so it's best to try and pay cash for everything, or wait until after closing.
If you have questions about a home mortgage or what you should, or shouldn't do during a closing, Premier Mortgage Resources (PMR) can help you. We have a full menu of mortgage options and have a hard-working, knowledgeable operations team ready to answer your questions.
To learn more about the do's and don'ts of mortgage closing, click here.