What Not to Do Before Closing on a House

Disclaimer: This content may include information about products, features, and/or services that The Federal Savings Bank does not provide and is intended to be educational in nature. 

It can feel like there is an endless stream of do’s and don’ts during the mortgage process. If you are close to closing on a home, you’ve probably navigated a lot of them. Now, with the closing table so close you can almost feel the keys in your hands, it’s time to pull out all the stops.  

In this article, we’ll explain eight things that borrowers should avoid doing between pre-approval and closing on their loans. This far into the process, the last thing you, your lender, and the seller want is a complication that derails the sale.

8 Things Not to Do Before Closing

1. Change Jobs

Your lender will verify your income and employment history during underwriting. They generally want to see that you have enough income to afford the mortgage and that you have consistent employment in your line of work.  

That’s why when borrowers change jobs close to closing, it can cause potentially serious complications for the home sale. Sometimes, if your new job is in the same line of work and has comparable or higher income, it might only result in a delay in closing, as the underwriters need to re-verify your employment situation. 

However, switching jobs can also completely derail your mortgage process, especially if your new job pays less than your old one. This may cause your lender to determine that you can no longer afford your mortgage, which might lead to a loan denial.  

If you are considering switching jobs while trying to get your mortgage, you should talk to your lender first. They may be able to help you keep your mortgage process on track or recommend a new course of action.  

2. Make Major Purchases

Large purchases before closing might be flagged by your lender. Avoid buying expensive items like: 

• Furniture 

• Appliances 

• New Cars 

• Boats 

This is especially the case if you are paying for these things with credit. Some large purchases can impact your credit score, and a negative change in your score could leave you with a higher interest rate on your mortgage.  

If possible, avoid major purchases until after you have closed on your new home.  

3. Opening (or Closing) Lines of Credit

Opening a new credit card before closing on a house can also impact your credit score, and it may change how lenders view your credit utilization. Higher credit utilization, a lower credit score, and more debt might make your lender view you as a riskier borrower.  

Similarly, closing a credit card, even one you barely use, can have a similar impact on the mortgage underwriting process. If it’s a card you don’t really use, it’s usually still better to keep it open as evidence that you aren’t using that credit irresponsibly.  

4. Make Large Deposits in Your Bank Account

You may be wondering, “How could more money in my bank account be a bad thing?” Well, when it comes to the mortgage process, big deposits can be a bit more complicated. At first glance, it’s a great thing—more money for a down payment, closing costs, or other upcoming expenses. However, a big deposit, bigger than you would be able to make with your standard earnings from work, may set off alarm bells for your lender.  

They could be concerned that: 

• You took out another loan 

• Have more income than you initially reported 

• Got gift funds and didn’t provide a gift letter 

If you have a large deposit to make for any reason before you close, be transparent with your lender about where it came from.  

5. Applying for Another Loan

Like opening a new line of credit, taking on a personal loan, or even co-signing on a loan for someone else, can impact your mortgage approval process. If you successfully take out either loan, the new loan will impact your debt-to-income (DTI) ratio.  

Big changes to that number could contribute to your lender shutting you down for the mortgage. But DTI may not be the only potential issue here, though. A hard credit inquiry can sometimes lower your credit score, which could cause issues with your mortgage application.  

6. Fall Behind Your Closing Schedule

Closing on a house can be a very tightly timed process. Generally, borrowers have a window in which they’ve locked their rate. It is wise to stay on top of deadlines during that period. Be sure your paperwork is submitted on time and respond promptly to lender requests. If you anticipate any issues keeping up with your closing schedule, talk to your lender as soon as possible.  

7. Forget to Pay Bills

Now may be a good time to finally get your recurring bills on autopay. Things often slip through the crack during the mortgage process. You may be laser focused on all of your mortgage process tasks, but then, you miss a payment on a utility bill. If that missed bill goes unpaid for long enough, it might end up impacting your credit score.  

So, as I said, consider setting up autopay for your bills or adding reminders to your calendar to manually pay them.  

8. Pay Off Collections or Loans Without Consulting Your Lender

Generally, paying off debts can be considered a positive thing for a borrower. However, oftentimes, paying off a loan can temporarily decrease your credit score. If that happens close enough to closing, that could have negative consequences for you, the borrower. So, before completely paying off a loan, talk to your mortgage lender to see what course of action they would recommend.

Final Thoughts

As you near your closing date, we hope that your homebuying process goes off without a hitch. Closing on a house is a big accomplishment and milestone. Using the eight items in this article as a starting point, be sure to have transparent, detailed conversations with your lender to try to stay on track with your loan.