This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Worst Things a Buyer Can Do Before Closing on a House

NEW YORK (TheStreet) — Once you find the perfect home, secure financing and sign the contract, you may be ready to pop open some champagne and start picking out curtains. Be careful, though. There are several mistakes you may make as a would-be homeowner that will derail a closing or drive your interest rate higher.

When you apply for a mortgage, the first credit check your lender runs won’t be the last. Another credit check is performed just before you close. If there are negative changes in your credit score, you could be saying goodbye to your dream home before you ever put the key in the door.

1. Change in job status

Banks want stability, and if you show them you're changing jobs at such an important time in your life, they may think twice about offering you a mortgage.

“A change in job status from part time to full time is fine, but not the other way around,” says Greg McBride, chief financial analyst for Bankrate.com. “Going from employee to contractor, or salary to commission, it’s just not a good move.”

Read More: 5 Signs It's Time to Buy a Home

If you’re moving to a better job with a higher salary, the change won’t torpedo your closing, but it might delay it.

“You would be required to show new paystubs, even if you’re moving to a much better job,” he says.

Changing positions within the same company is not likely to raise red flags as long as your salary stays the same.

2. Making late payments of any kind.

If you have a mortgage on your current property, missing a payment during this time could cause serious problems, says Peter Grabel, managing director of Luxury Mortgage in Stamford, Conn.

“One late payment will not only kill your score, it will make you ineligible for a loan with most lenders for at least a year,” he says.

It's not just mortgages. Even something as innocuous as a utility bill can do damage. Unfortunately, if you’re planning a major move, it’s easier than you might think to let bills fall through the cracks, says Jacky Teplitzky, a broker with Douglas Elliman in New York City.

“This sort of thing won't show immediately. The utility company has to report it, and the process takes time. But there are scenarios where it can weaken your position,” she says.

For example, if you’ve already moved and your mail forwarding service hasn’t kicked in, a missed bill may never make it to your door. Or if you sublet your old place and the tenant has failed to pay the utilities, those negative reports could find their way to your credit score.

“It may not even be something fresh,” McBride says. “Even if it happened six to nine months ago, it could just now be showing up on your credit report. All the lender is looking for is a change in your credit score from the first time they pulled it. If those numbers don’t match and you have something on there that’s new and unfavorable, it’s going to be a problem.”

3. Having too many unnecessary credit inquiries

Every time a lender makes a credit inquiry — when they pull your credit report — it affects your score. If you’re moving, you may be more tempted to apply for store credit cards to save 10% to 20% on expensive items such as linens and home decor.

“Those 'no-interest, no-payment' offers are tempting, especially when you're getting ready to fill a brand-new house with things, but consumers too often jump the gun and apply for new accounts to purchase appliances and furniture,” says Gerri Detweiler, director of consumer education for Credit.com.

Store credit cards also carry high interest rates, making them bad choices for the long haul, Teplitzky explains.

“Store cards can be so tempting when you’re standing at the checkout. But they are horrible cards. Even if you weren’t trying to be on your best behavior for a mortgage, those cards are just a bad choice. Before your closing, don’t get tempted, or you’re really going to regret it,” she says.

4. Taking on debt

If you’re moving to a new home because your family is growing or if you’re moving from a city to a suburb, you may need a new car. It’s best to wait until your home purchase is complete.

Read More: 7 Worst Things to Hear in a Home Inspection

“I’ve had people tell me, ‘They had to pull our approval because we took out a $24,000 car loan two days before closing,’” McBride says. “But that’s debt that you didn’t have upon application, debt that changes the 'before' and 'after' picture on your credit report. If you were right on the edge of approval to begin with, it could be back to the drawing board.”

Unfortunately, when you take on any type of debt you didn’t have at application, it calls into question whether you’ll be able to pay your bills once you add a mortgage into the mix. The debt you take on doesn’t even have to be something as substantial as a car. Even common purchases associated with a new home can be dangerous.

“You don’t want that $3,000 of furniture — a bedroom suite you bought over the weekend — to derail your closing. Yes, it’s a smaller purchase, but it’s the same thing as buying a car. It’s a credit inquiry, and it’s debt you’re taking on.”

Any expensive items you buy will almost always your credit score, and may also affect your debt-to-income ratio, Detweiler says.

“Wait until after the loan is completed before you go shopping for these major purchases,” she says.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 18,030.21 +6.04 0.03%
S&P 500 2,081.88 -0.29 -0.01%
NASDAQ 4,773.4720 +8.0480 0.17%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs