Three Fatal Mortgage Mistakes to Avoid When Buying a Home

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Filed under: Qualifying for a Mortgage Loan

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You’ve planned, you’ve saved, you’ve searched, and you’ve negotiated.  Now, you’ve been approved for the loan and you’re finally in escrow on that dream home.

Make sure you avoid these fatal mistakes that could cause everything to come crashing down!

Mistake #1:  Making a big purchase

I’ve seen buyers in escrow buy cars, furniture, and other big-ticket items that end up lowering their credit scores or severely changing their debt to income ratios in the middle of escrow.  Doing this can take the well-qualified buyer and overnight turn them into a buyer who no longer can get financing.

There is no “quick fix” if you make a big purchase that throws off your credit or debt to income ratios.  Before you make such a purchase, check with your lender and make sure there won’t be a problem.  Or, better yet, wait until after you close before you decide to go on a shopping spree.

Mistake #2:  Quitting your job

I know it sounds crazy, but we’ve seen this happen!

Mortgage underwriters don’t like to see sudden income or job changes in the middle of escrow.  Taking a new job, in most cases, is a huge red flag for a lender and they will almost always look at this negatively.  Even if you are taking a step up in position and pay by moving to a new company, your lack of history at that new company could become an issue.

If you think that a job change is in your near future, discuss it with your lender at the very beginning of the application process.  Once you are in escrow, the best thing to do is put off any job move until after you move into the new house!

Mistake #3:  Stop paying the mortgage on the old house

This is another one that could have “deadly” results.  Here’s what happens…

You’re about to sell the old house and move into the new one.  Your mortgage payment is due on the old house but since it’s in escrow and the loan will soon be paid off with the proceeds of the sale, you decide that you don’t really need to worry about making the payments any longer.

Then, for unforeseen reasons, the sale of the house is delayed (which is common) and your mortgage payment is suddenly 30 days late and it gets reported to the credit bureau.

That mortgage late could be just enough to disqualify you from obtaining the financing on the new house.

The bottom line…

Once you are in escrow, don’t make any life changes that could affect your income, savings, credit, or debts.  Keep your financial situation constant until you have the keys to the new house in your hand and that house is officially yours.

If you have any questions about this or any other aspect of mortgage lending, please feel free to contact me at any time.

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