What Not to Do Before Closing on a House

You’ve gotten pre-approved, found a home you like, and put in your offer. It might feel like you’ve done everything you need to complete your home purchase, but there are a few more steps before the deal is truly sealed.

You have to get your offer accepted, submit your full loan application, and your loan will go through underwriting, just to name a few of the milestones you’ll hit before closing day. While you’re working towards closing on your new home, there are some things you’ll want to avoid doing to help keep things moving smoothly.

Here are some mistakes you can avoid during the closing process, along with a few tips on what you can and should do during this time to make your home financing a breeze.

How Long Does it Take to be “Clear to Close” on a House?

As you’re reading about the dos and don’ts of the mortgage process, it helps to know how long of a period we’re talking about to provide some perspective.

From application to closing, the average home financing timeline lasts between 45 to 60 days. During this time, your lender is evaluating both your ability to repay the loan and verifying that your property is worth the amount for which it’s being financed. That’s why it’s critical that the information they have to assess the loan remains the same through closing.

Common Mistakes to Avoid After You’re Pre-Approved

Once you’re pre-approved, your lender has reviewed your credit and income and has indicated you’ll be able to obtain the loan you need to finance your new home. If any of the criteria that the pre-approval was based on change, it could create more work for you and your loan officer to get your loan fully approved before closing.

Avoid these common mistakes that could delay or jeopardize your closing:

• Establishing new loans or lines of credit. Establishing new lines of credit impacts your credit utilization and calculations about what you can afford. Even if you’re looking to buy furniture or other items for your new home, you should wait until after closing.
• Closing any credit lines. Although you might be tempted to close a credit card you’ve paid off, this advice follows the same premise as the previous one. You don’t want to alter how much credit is extended to you while your loan is being evaluated.
• Making unusual or large deposits. Lenders need to know that any money you’re bringing to closing in the form of a down payment or closing costs is your money and that you don’t owe anyone back for it. Any large deposits to your account will likely be flagged by underwriters and may be an obstacle to closing on time.
• Employment changes. A change in employment can mean a change in your income, which would affect how much of a loan you can qualify for. Lenders also need to see that your employment is secure, so switching to a different employer during the loan process may raise concerns about the security of your position at that new job.
• Late and missed payments. This is probably the biggest mistake of all to avoid. Your lender is making an assessment on whether or not you can reliably repay your mortgage as they’re approving your loan and missing a payment on any bill is not a good indicator that you can make your monthly mortgage payment on time.

Things You Should Do During Escrow

Once you’ve paid your good faith deposit, or deposit escrow, there are some steps you can take to keep things rolling in the right direction.

You should:

• Maintain your credit score. It’s easy enough to do – just keep doing what you’ve already been doing! This includes paying your bills on time, maintaining healthy balances on your credit cards, and keeping an overall reasonable amount of debt based on your income.
• Start packing up your old home. It’s never too early to start packing! The sooner you start, the less stressed you’ll feel as it gets closer to your closing date and moving into your new home.
• Set up new utility accounts and services. Even if you can’t set the installation date, you can at least take a look at what utilities you’ll need to get started in your name and which providers are available for Internet, cable, phone, and any other services you may need at your home.
• Start comparing homeowner’s insurance options. You’ll need homeowner’s insurance to close on your loan, so get a head start and start comparing quotes from different insurance companies.

What to Expect on Closing Day

As your closing day draws near, you’ll receive a closing disclosure. This is a standardized form, with a format similar to your loan estimate, that is required to be delivered to you at least three days before your closing.

The three-day rule ensures you’ll have time to review your closing disclosure and fix any discrepancies with your loan officer.

Your closing disclosure will detail all the finalized aspects of your loan, including:

• Purchase price
• Loan/origination fees
• Interest rate
• Estimated real estate taxes and insurance
• Closing costs
• Any other loan-related expenses

Be sure to pay close attention to the items listed in your closing disclosure because some amounts and terms might have changed from your loan estimate.

Questions About Closing on Your House? Contact Your Loan Officer

Sometimes circumstances happen outside of our control – that’s life. If you end up in one of the situations we suggested you should avoid, don’t freak out. Instead, reach out to your loan officer.

Your loan officer is an expert on your specific loan program and will have taken the time to also learn about your particular financial situation. They will be able to advise you on what next steps you can take to stay on track to close on your new home and can help you change course to a different financing option should that be the best course of action.

Stay in touch with your lending team, and they will help you get to that celebratory closing day!

Now you know what you should do and what you should avoid in order to get to closing day on your next home with as few hiccups as possible. The next step is to work with a loan officer who can make all of that happen! Get a free consultation from our team to discuss your goals and the best financing options for you.