Kathy Colville of Kathy Colville & Associates is ranked among the country's top 1% of real estate agents. And she recently wrote an article for HelloNation, identifying two deal-crushing blunders that home buyers make all too often.
Don't think Colville's advice applies only to newbie buyers, though. Most of us move only eight times in our lives (including as children when our parents manage everything), according to Joybird. So, few of us gain enough experience to know where all the landmines are buried in the home-buying process.
1. Buying Things for the Next Home
It's normal to be excited when buying a home. One pictures themself settling down on the couch with a cup of coffee, soaking up the sheer joy of finally living in their dream place.
But wait! Is that picture totally perfect? Wouldn't it look so much better with a new couch instead of the shabby old one? And maybe some cushions. A new TV, perhaps. There, that's much better.
It's hard to resist window shopping on the next visit to a mall. And look at the deals! Get a store card, and there's a huge discount on offer.
What's the harm? After all, the mortgage has been approved after a credit check and the calculation of one's debt-to-income ratio (DTI). So, nothing can derail closing now.
Except something can. Too few people realize that the mortgage lender will do another credit check immediately before closing. And opening new credit accounts (such as a store card) or piling thousands onto existing card balances can easily send a credit score tumbling while adversely affecting one's DTI.
"Mortgage lenders are also on the lookout for new credit inquiries," says The New York Times. "A credit inquiry from, say, Toyota signals that the borrower is probably in the process of buying a car — making the kind of large purchase that is another red flag."
Other Threats to a Successful Closing
Other things can also lower a score. So, don't open new credit accounts or close existing credit lines such as credit cards, make any late payments, or change jobs. Once an application has been approved, the applicant's goal is to keep things exactly as they are through to closing. After that, anything goes.
First Security Bank & Trust urges applicants to avoid making large cash deposits, too. "A large, out-of-the-ordinary cash deposit might look suspicious. It will require a lender to do research into whether the funds are a cash loan provided by a friend or if the unexpected increase is even legitimate," it says.
Don't think these are the sorts of issues that a charm initiative can solve. Lenders can and do withdraw funding when a credit score or DTI ratio changes materially for the worse.
"Changes to your credit score can delay your mortgage approval and threaten the successful closing of your home," says Experian.
2. Failing to Respond In a Timely Way to Lenders' Requests
"Lenders, underwriters, and title companies operate within strict timelines to keep transactions moving toward completion," says Colville.
"Delays in submitting required financial statements, employment records, or identification documents can slow progress or create complications that might have been avoided with more prompt communication. Buyers should remain attentive to emails, phone calls, and time-sensitive requests throughout the escrow period to ensure the process continues without disruption or costly rescheduling."
We recommend gathering together the documents a lender will likely require well before making an application. That way, the applicant has time to get copies of any missing paperwork.
At a minimum, lenders need pay stubs, W-2s, tax returns, bank statements and government-issued identification. They may require more for non-standard cases, such as self-employed people, those who rely on tips, large bonuses or social security for significant portions of their income, and those with complicated financial affairs.
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