You’re finally nearing the finish line in your homebuying journey, but the escrow period requires some careful navigation. Even small financial or lifestyle decisions can make or break your closing process. Here’s a guide to the seven crucial mistakes to avoid so you can reach closing day without a hitch. Let’s keep your new home well within reach, ready to make the right moves.
1. Save Major Purchases for After Closing
With your new home on the horizon, you might be tempted to start shopping for furniture or appliances. However, large purchases can impact your debt-to-income ratio and, in turn, your loan eligibility. Lenders will closely monitor your financial profile until the deal is closed, so even buying a new car could shift the balance in a way that delays approval. Hold off on big purchases until the keys are officially yours.
2. Put a Hold on New Credit Lines (Even for Small Discounts)
You may be tempted to sign up for a store credit card or open a new line for that small discount, but new credit accounts can alter your credit score and raise concerns for your lender. Stability is the priority during escrow, so avoid any changes to your credit profile, no matter how minor they seem. This period calls for consistency and caution to keep your approval status intact.
3. Avoid Changing Jobs if Possible
A new job offer can be exciting, but a sudden employment change may signal instability to lenders who are looking for steady income. Changes in your job or income, especially switching to a different industry or role, can slow down or impact your approval. If the opportunity is irresistible, consult with your lender first to understand any potential effects on your loan process.
4. Keep Detailed Records of Large Deposits
Unexpected or large deposits can catch the lender’s attention, as they will need clear documentation for each one. If you’re expecting gift funds or other significant deposits, make sure you can provide a thorough paper trail. Transparency is key, so be prepared to show all relevant records to avoid delays or complications.
5. Stay Consistent with Monthly Payments and Everyday Spending
Now is the time to avoid any disruptions to your regular payment schedule. A late payment or unusual spending spike on your credit card can impact your credit score or debt-to-income ratio, which lenders are monitoring. Stick to your usual budget and ensure bills are paid on time to maintain your financial stability in the eyes of your lender.
6. Hold Off on Big Financial Changes Until Closing
Any significant financial shifts, such as large withdrawals, investments, or account transfers, could raise red flags for lenders. Keep your finances calm and steady throughout the escrow period. Save new investments, major transfers, or account modifications for after the closing process to avoid potential complications.
7. Leave Old Credit Accounts Open
Although it may seem responsible to close old credit accounts, this can actually reduce your credit score by changing your available credit and impacting your credit utilization ratio. Avoid closing any credit lines until after closing to maintain a stable credit profile. Once the home is yours, feel free to clean up your credit accounts as needed.
Conclusion: Smooth Sailing to Your New Front Door
The escrow period is an exciting yet critical phase of your home-buying journey. By avoiding these common missteps, you’ll keep your path to homeownership clear and on track. Ready to turn the key to your dream home? Use these seven strategies to navigate the final stage with confidence and peace of mind.
