Do Not Do These Things When Closing on a Home Purchase
Don’t buy a car or make any major purchases that will affect your debt payment while you’re in escrow. If you’re in escrow or if you’re thinking of buying a house, it’s very important to understand why not to do the following things. Because it does happen. Buyers get excited and they may do things that affect the qualification, that affect the points, they may charge you, or it may eventually cancel this escrow. So let’s start with point number one, which is, please do not buy a car or major appliances when you are in escrow. When you buy a car, assume you’re paying a loan on it, not paying cash. So assuming you have a payment on the car, if you buy a car or large appliance, that’s a payment, and that works against your debt ratio, which is the lender. Your property tax, your loan payment, and your credit card payments all add up to a lot of debt. You may have a car or another car in the family. And if you buy another car, let’s say it’s a 500, 600, or $700 a month payment, that adds to your debt. So your debt ratio increases, which means your chances of qualifying go down. So that may be a red flag.
Do not open new credit cards or, at the same time, not charge large sums of money on your credit card account. For example, you charge a vacation because you’ve been thinking about it. You might think, before we move into the house, let’s go take a quick vacation because you can be busy moving and remodeling, etc. So it is highly recommended that you don’t make any large purchases on your credit card. Again, this increases your debt and lowers your qualification. I wanted to take a quick moment to thank you for visiting my channel and watching this video. While you are here, and if you’re visiting me for the first time, please subscribe to my channel and also share or comment. I’d like to hear what you think about the videos that I do. So thanks for subscribing.
Do not co-sign for somebody. You yourself are getting a loan for a house purchase, whether it’s a small loan or a big loan. And most buyers barely qualify, at least for the buyers that I work with. They have a hard time or just barely qualify because there are so many debts and property taxes and insurance and interest payments, car payments, and maybe appliances and furniture payments. So when you cosign, maybe your brother or sister asked you to cosign, or your buddy asked you to cosign on a car they are purchasing or anything else. Once you cosign, you carry that debt. So if you co-sign at the end of escrow, the lender will check your credit and all the debt that you have. So if that shows up, that adds to your debt ratio. Again, it’s all about the debt ratio. How much are you making? How much can you afford to pay on top of your principal and interest? So if you already have a car and appliances, and you add another car payment because you co-sign, that’s a no-no, because it’s adding to your debt. So again, do not co-sign for anyone, even if you want to. You can co-sign after the close of escrow if you have to.
Do not make any large deposits. Obviously, the majority of home buyers will put down a downpayment, whether it’s three and a half percent down on an FHA loan or 5%, 10%, or possibly 20% down on a conventional loan. So you cannot put a big down payment in a bank account while you’re in escrow because banks are going to check on where that money came from. So if you have a big amount coming from somebody and then you put it in the bank for your down payment, that’s a no-no, because most lenders want that money in escrow, what we call a seasoned account. That means, let’s say you’re buying a $500,000 house and you’re putting 20% down. So you’ll need a $100,000 down payment plus an additional $10,000. So you need $110,000. And let’s say you only have $50,000 in your bank account and when you go into escrow, somebody gives you the money or you have some money from wherever it came from, and you put it in the bank to make up for the down payment. That’s a red flag. The banks will not allow that because they’re going to question and say, where did that money come from? Did you borrow from somebody? Is it from someplace I don’t want to mention? But they don’t like that. So they would like to see the money in your account, in your savings account, or a checking account, for at least 60 to 90 days. It varies with the lender. So that’s a very critical thing. And if you do deposit that large amount, let’s say your parents gave it to you or your uncle or your friend, or somebody gave it to you, they may require notification from them or a letter that they provided that money to you, and they may call it “gift money.” So your friends or family who gave you the money may want to write a letter showing that it’s gift money and you don’t have to pay them back because it’s gift money. Because if you have to pay them back, then that’s a debt ratio again. So it’s all about debt, how much you owe when you’re buying a house. So, transforming large sums in your account while in escrow is a big no-no, just like the other tips I gave you.
If you have a job, keep the job; don’t change jobs or your career while in escrow. You might be buying a house because you got a promotion and you have to move during escrow, or you may be getting a higher payment from a different company. So you’re thinking, hey, I’m closing my escrow on the 30th of the month. I’m going to start my new job. I’m excited about the 15th. That’s a no-no because they want to make sure that you have a stable job and don’t change your career or your jobs, because that may affect your longevity in your job. In your new job, maybe you won’t last 90 days, or you might be on probation. So it’s better to have the job that you’ve had for a while. And if you have to change jobs or careers, wait until after you close your escrow and then do that.