There are two ways to learn the things that a home buyer should not do before closing a real estate sale: the easy way, and the hard way. Unfortunately, many people learn the hard way. But listening to the advice from your mortgage broker and your real estate agent can help ensure you learn the easy way.
Whether it's from a temporary lapse in judgment, or from the stress of closing the sale of their new home, sometimes buyers make mistakes that end up delaying the closing. Learn more about which mistakes to avoid.
- If you have a freeze on your credit, ask for it to be lifted rather than canceled.
- Correct errors on your credit report before you start the homebuying process, not while you’re under contract.
- Don’t apply for new credit or open new credit accounts while you’re under contract.
Be Careful of Your Actions
Mortgage rules and guidelines don't necessarily make a lot of common sense—except to the government committee that created the regulations.
For example, a home buyer with a freeze on their credit report might be asked by the lender to temporarily lift that freeze. What the home buyer hears is something different: to cancel the credit freeze. If the buyer cancels the freeze, it could cause a new credit report to be generated that could produce a lower FICO score.
In that event, a new closing disclosure would need to be drawn to reflect the higher mortgage interest rate. One-fourth of a point jump from 4% to 4.25% on a $300,000 loan results in paying more than $15,000 extra over the term of a 30-year loan.
Additionally, generating a new closing disclosure under TRID guidelines means the buyer will need to wait through another time period before loan docs can be drawn. Waiting for a second time period can delay your closing.
Don't Try to Correct Your Credit Report
On top of this problem, some borrowers—upon checking credit reports—find an item that is incorrect. The time to try to correct a problem is before you are in contract to buy a home, not during the contract period. But the error is glaring you in the face, right there on your computer screen, and all you have to do to dispute the error is to click the mouse.
Don't do it. Don't touch the mouse. Disputing an error while in contract to buy a home can also trigger another credit report, which could generate a new closing disclosure. It's all downhill from there.
Things You Shouldn't Do When Waiting to Close a Real Estate Sale
- Do not touch your credit report. Don't even look at it. You could make a harmless inquiry and end up delaying your closing. If you have any problems with your credit report, wait to address them until the home buying process is complete.
- Do not establish new credit. Cash-back cards offered out of the blue to you? Delete those emails, shred the reply forms, or wait until after your transaction has closed to accept new credit.
- Do not close any credit accounts. Even if you realize that you never use a certain credit card, for example, feel free to cut it up, but don't cancel that line of credit while you are waiting to close the purchase of your home.
- Do not increase the credit limits on your cards. Anything that is worth buying with a credit card is worth waiting for. If you get an offer in the mail, don't respond to it.
- Do not buy anything with a credit card or put an item on layaway. This is extremely important, and it will probably be difficult—but it's worth it. Yes, you may need a washer and dryer, as well as other furniture and appliances, but wait until you close to order it. Even if a salesperson says they'll write it up and hold it for you, there's a chance it could be entered into the computer by mistake, which could delay your closing. It's best not to take the chance.
At the time of writing, Elizabeth Weintraub, CalBRE #00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.