This is it! The big day has arrived. You have almost completed the home buying and home loan process. Today’s the day you sign your final papers, get your keys and…uh-oh. Those are two words you do not want to hear on closing day. What should you do to keep your closing on track? And maybe more importantly, what shouldn’t you do? Here are a few thoughts on how to avoid closing day surprises.
No New Credit. You saw the greatest deal on a TV that would be perfect for your new family room, and the store will cut the price even more if you open a store credit account. Stop. Do not proceed. Your lender will pull your credit shortly before closing, and if you open a new account (even if you don’t charge anything right away), or add major debt to existing credit cards, your debt-to-income ratio may change to the extent that you will no longer qualify for your loan. This rule applies to co-signing a loan, too. Don’t let anyone other than your lender check your credit until after closing.
Keep Credit Accounts Open. This one is going to sound counterintuitive, so stay with me. You might think that you could improve your credit score by closing a little-used account, but’s that’s not the case. Here’s why: Part of your credit score is based on the length of time you’ve had credit. If you close that old department store account because you never use it, and it’s the account you’ve maintained for 10 years, guess what? Your credit score could go down, affecting your loan. Think status quo – no changes while your loan is in process.
Don’t Change Jobs Or Compensation Type. Getting a home loan and changing jobs do not go together. Lenders want to see a stable employment history. You’re borrowing a lot of money; the lender wants to know that you can repay it. Changing companies or changing the way you are compensated (salary to commission, for example) at the same company can cause problems and delays. If you get an amazing offer or your employer says your compensation method must change, talk to your mortgage loan originator right away.
Funds At The Ready. If you will need cash to close, be sure those funds are available well in advance of closing. You will need to either wire the money to the title company or present a cashier’s check at closing. No personal checks and no cash. If you’re not sure of the exact amount but you want to be certain that your wire arrives in time or you have adequate time to get your cashier’s check, take more than you think you’ll need. You’ll receive a refund after closing.
You Know Who I Am. Be prepared to show ID at the closing. Make sure to ask what form(s) of identification will be required to sign your documents.
That Big PayPal Deposit. Your lender may need to see your most recent bank, savings or brokerage account statements close to your closing date. If you have a large, unexplained deposit, it will put the brakes on your loan. Lenders have to know where your money is coming from – it’s a Federal banking regulation. One borrower almost failed to close because he sold an expensive bicycle he wasn’t using and deposited the proceeds. If you’re expecting any deposits outside of your usual run of business, talk to your mortgage loan originator in advance.
I Can Close In Paris, Right? Maybe. What you can do and who can act for you varies across the country. Don’t assume that you can give someone your power of attorney to sign your closing documents. In one case, a borrower who worked abroad had two choices for his refinance: Close at the nearest US Consulate and pay a small fortune to a notary, or fly home. He decided to fly home, with the added bonus of seeing his family. In another instance (in a different state), a couple buying a home gave her mom power of attorney and she closed for them while they were out of the country. Always check well in advance.
Buying a home (or refinancing) is exciting, but don’t get carried away. Talk to The Crosby Team at First Choice Loan Services Inc. before you make any changes that could affect your loan. And think of all the fun you’ll have after you close!
Anna Maria Lepore
Senior Vice President | Closing & Funding