No – you don’t want to destroy your chances of owning a new home here in Alexandria, VA, but so many would-be homeowners do it each year that it seems like a good idea to mention just how they go about it.
Here’s one couple’s story:
Mr. & Mrs. Smith had been married for several years and dreamed of moving out of their apartment and into a home of their own. They were tired of living by the landlord’s rules. They wanted a buy a puppy. They wanted to hang some family photos. They really wanted to stop living with that ugly mustard-colored paint in the living room.
So, they worked on their credit, being careful to pay every bill on time, pay down their credit cards, and put a few dollars in the bank.
When they thought they were ready, they went to see a lender and learned about the programs available with the down payment they’d saved. They found out how much they could spend on a house under the interest rate the lender offered.
All was well. They were pre-approved for a mortgage loan and they went shopping. After some trial and error, they got an offer accepted and were well on their way. The inspection report came back fine, as did the appraisal.
They were one week from closing, and then…
When the lender re-checked their credit the day before closing, there was a new account, with $4,000 in charges and a new $200 per month payment. The loan was denied.
That’s just one way that would-be homeowners “kill” their loans at the last minute.
You can also do it by:
- Making any large purchase – as many have learned after buying a car.
- Making application for a new credit card.
- Going on a spending spree with a current credit card.
- Signing up for a new cell phone.
- Emptying out a savings or retirement account.
- Using a current credit card to reserve an airline ticket, rental car, or hotel room.
- Quitting a job or changing jobs.
- Co-signing a loan for a friend or family member.
- Forgetting to pay a bill on time.
- Letting a retailer, car dealer, or ANYONE access your credit report, even if you don’t make a purchase. *Hint: You can “window-shop,” but DON’T give out your social security number.
The moral of this story: When your lender and your real estate agent tell you not to do anything to change your financial picture before closing – pay attention! I used to tell home buyers, once you apply for a mortgage, please live on ramen noodles – until a client gave me a 5 minute lecture on just how horrible ramen noodles were for you. Okay, then, mac and cheese. Just don’t do anything out of the ordinary without consulting with your loan officer.
If you’re not sure whether some action will harm you, ask your lender before you do it.