Here are Ten Things a future Home Buyers Should Never Do Before Closing on a Home. If you do any one of them, it could cause a huge delay in your closing. Lenders are very tough on borrowers today and they check and double check your credit and work history prior to lending. They don’t like surprises and you shouldn’t give them any.
The process is well underway for buying your new home. You’ve made the offer and the sellers have accepted it. Your escrow has been opened. You’re counting the days until you close escrow and get the keys to start to make the house your home. Your lender pre-approved you and sent your application through underwriting, so buying the house is a sure thing, right?
Not quite. Nothing is certain until the keys are in your hand and the deed is recorded. There are still hurdles to get past before it’s yours, and your actions between now and closing can create headaches, slowdowns and even stop the transaction. Yes, stop the transaction cold.
1. Don’t Make a Major Purchase of ANYTHING without talking to your lender first
You’ve just found out your credit is A+. That’s great news, because a new car would look fantastic in the driveway of your new home. But hang on–if you are depending on a mortgage to move in, you’d better wait until after closing to buy that car.
An increase in your debt to income ratio reduces the amount of monthly income available for your mortgage payment.
If you tack on a higher car payment, the bank might decide you can’t afford the home.
Using cash to purchase the car could also create a problem, since banks consider cash reserves when approving your mortgage. If you must make a major purchase before closing, talk to your loan officer before you do it.
2. Don’t Change Jobs Unless It’s Necessary
Lenders like to see a consistent job history. They didn’t used to be nervous if you changed jobs within the same field, but it’s better to stay put until the house is yours. If you do need to change your job, your escrow will slow down while the lender waits to see four (4) pay stubs to make sure your new income will allow you to still purchase that home. That slow down could effect not only your seller but others if the seller is buying a new home, too. The seller could ask you for additional funds because of the delay. Don’t do it unless it’s absolutely necessary.
3. Don’t Give an Earnest Money Deposit Directly to a For-Sale-By-Owner Seller
Your good faith deposit should go into a trust account. Some for sale by owner sellers don’t understand that funds are not their’s to spend until closing. The only place a trust account should sit is with a Title & Escrow Company. Escrow Companies are neutral third parties to a purchase and they take their instructions from the buyer and the seller. They are impartial and if you buy that For-Sale-By-Owner home write your deposit check out in an escrow company’s name only.
I’ve heard many stories about sellers who spent the deposit money prior to closing. When the transactions didn’t take place for valid reasons–such as financing or repair issues, the buyers had to fight for a refund. That can’t happen when the funds sit in an escrow account.
Find an attorney or escrow company who will hold the deposit for you until closing day and make sure your contract dictates what happens to the funds if the transaction doesn’t close.
4. Don’t Let Your Emotions Take Over
Keep a cool head during the entire home buying process, especially during and after a home inspection. Be realistic. No home is perfect, especially older homes. It’s not unusual for new owners to take care of some repairs themselves. Don’t let the seller’s refusal to do a small repair kill the deal on a home you truly love. Realors are able to negotiate for things you might not be able to do so ask your agent if some things are possible and let them work on it.
On the other hand, don’t fall so much in love with the house that you’ll buy it no matter what needs to be done–unless you’re sure you can handle it emotionally and financially. Decide what type of repairs you can realistically tackle, then stick with the decision.
5. Don’t Forget to Switch Utilities
That sounds simple, but you’d be surprised how many people forget to apply for utility service at their new home. Call the utility companies as soon as you have a contract. Find out how many days lead time they need to switch the service, then get back with them when you have a firm closing date.
Don’t forget to discontinue services at your old home. That doesn’t mean to shut off utilities it means to make sure the new owner’s have their name on the bill from the day of closing forward. If they haven’t done this call your Agent to help.
6. Don’t Forget to Line Up Your Fire & Hazard Insurance
A no-brainer, right? But it’s another often-forgotten task that buyers scramble to take care of at the last minute. Before closing, your lender will want to see an insurance binder showing you have coverage for the new home. Get it as early as possible so that closing isn’t delayed. Your Escrow Officer will need the name of your Insurance Agent for her files, too.
In some locations, additional types of insurance coverage might be necessary such as Flood Insurance. Talk to your lender about insurance requirements well before the closing date.
7. Don’t Become Best Friends with the Seller
I’ll get some flack on this one. It’s great to be friendly, but don’t get into too many long discussions with the sellers, because personality conflicts often cloud judgments.
Remember, this is their home. You’re excited about moving in, and if you didn’t like the house you wouldn’t have offered to buy it. But you’ll make changes–everyone does. A casual statement about “ripping up that ugly carpet” might be hurtful enough to keep the seller from negotiating with you about repairs or other issues that crop up.
8. Don’t Panic if the Appraisal Comes in Low
At least not at first. There are some things you (and your agent) can do to correct the problem. Study your options and talk with your agent about the best things to do. Today it’s very difficult for an Appraiser to do his/her job with prices dropping significantly in some areas. If your appraisal comes in really low, you can ask for a second appraisal from a second person. Appraising is not done with computers so everyone doing it does it a little differently. Lenders are also asking for sales comparisons closer to your purchase date and that isn’t always easy to provide today.
9. Don’t Go It Alone
If you’re working with an agent, it’s the agent’s duty to track many of the day to day details that involve the lender, the seller, or the seller’s agent. Be sure your agent schedules a final walk-through just before closing. At this final walk-through make sure everything is the same as it was when you made your offer. It is the Seller’s responsibility to keep their home the same all during the escrow period. If it isn’t, this is the time to find out, not after you own it.
Should you find additional problems during this walk-through, it’s not too late for additional inspections and negotiation with the seller.
10. Don’t Ignore Lender Requirements
Know what is expected of you and take care of it. For instance, a Certificate of Eligibility is required to move forward on a VA loan. That’s something you must handle yourself. Answer your lender questions and make sure that you provide required paperwork as quickly as possible–moving into your new home depends on it.
Your lender will call your employer to verify your employment. They are likely to do this several times so don’t be surprised. The lender talks with HR if you work in a large company or with your boss if it’s a small company. The lenders do this to make sure you are still employed before giving you your loan. They expect you to be able to pay them back and being employed is a large part of this.
If you follow these 10 things during your escrow period, you’ll get those keys and own your new home without any hiccups.