So, you've cleared the pre-approval process for that PERFECT new home that you've been dreaming about... and may have already found. You may already even have established a contract to purchase it. Wow - things are really cruising along. Life is good! The excitement is so fun you can hardly stand still. Oh, and guess what... things are going spectacularly for your spouse's career too. There's talk about a change in position for them at work and it's sounding pretty great. You yourself are already making plans for the new home and all the things you'll need to finish it out. What? It's July 4th weekend and you see plenty of furniture and appliance ads in the paper. YES!!! Just what you've been waiting for! Things are rockin' along so well that you really don't let the break-down of your car bother you much. You've been considering getting a new one for a while, so you may go shopping for one this weekend while you're out looking at furniture and appliances for the new home.
Okay, let's do a quick reality check on how many ways the above is going to ruin your chances of actually getting into that new dream home. When home buyers go through the "pre-approval" process, that's exactly what it is.... PRE. It's not a guarantee or "done deal". Some buyers may think that once that's done they have cleared all the hurdles of getting their financing all lined up, but that's far from reality. Pre-approval is simply the first stage of the process. Once you've selected a property, buyers then go through a formal approval for the financing required for the purchase.
Wooohoooo!!!! you say? You've already made it to that point? Oh, so it's time resume the top paragraph and get those appliances, furniture, and new car? WRONG! Again, that could be like saying bye-bye to that new home. You see, when your approval is processed, it's kind of like a snapshot of where you stand financially. Your lender then uses that as part of their decision on your qualifications to receive financing. What some buyers don't realize is that there's another snapshot coming... closer to closing. Lenders don't just look once and wave their money-wand and you're good to go. They are going to follow you all the way to closing.
What does all that mean? Exactly this: The lender used a snapshot to approve you. If that snapshot varies too much between approval and closing, that change could jeopardize your borrowing ability. When the lender analyzed your snapshot, they saw your level of available funds to pay them back. Fast-forward to those furniture and appliance ads. If you go purchase furnishings for that home, you now have fewer available funds to repay the lender and that could be a deal-breaker for them. Same with a car purchase. ANYTHING that substantially changes your distribution of your income or assets could alter your borrowing ability, or could cause a delay while the lender reevaluates your ability to repay the loan.
But what about job changes? Those can have the same affect as increased expenditures leading up to closing. A change in job can make a lender take another look. It's not a clear-cut case because obviously a lot of people take new jobs, relocate, and buy new homes, but you'll want to address your situation on the front end. Many times, job changes in the same industry are looked upon more favorably than career changes. Check with your lender though for specifics to your situation.
In summary, you want your position to remain as undisturbed as possible during the application, approval, and closing process. Here is a list of tips to serve as a reminder.
Things NOT To Do Before Closing on a Home
- Do not change jobs or become self-employed (check with lender if relocating)
- No vehicle purchases
- Keep credit cards current and do not make any unusual purchases (especially large ones)
- Do not spend savings intended for down payment
- No large purchases such as furniture and appliances
- Do not run credit reports (you or anyone else other than your lender)
- Do not deposit large sums of money into your accounts (other than payroll)
- Do not change bank accounts
- Do not co-sign for anyone on anything
