Home Buyer Education

Home Buyer Mistakes to Avoid Before Closing

Your mortgage approval can still be affected after pre-approval. Learn which credit, debt, employment, banking, and spending decisions may create delays or change your eligibility.

Pre-Approval Is Not the Finish Line

A pre-approval is based on the information available at the time it is issued. Before closing, the lender may review your credit, employment, income, assets, debts, homeowners insurance, and other parts of the file again.

A decision that seems financially responsible—such as paying off a loan, moving money, or accepting a different job—can sometimes create an unintended mortgage problem. The safest approach is to ask before making a significant change.

The most important rule

Ask Before You Change Anything

Before opening credit, paying off debt, changing jobs, reducing work hours, moving money, co-signing, or making a large purchase, contact your loan originator. A five-minute conversation may prevent a costly delay.

1

Do Not Open New Credit or Take On New Debt

Avoid applying for or financing furniture, appliances, vehicles, electronics, home improvements, personal expenses, or other purchases before closing.

A new inquiry, account, balance, lease, or monthly payment may affect your credit score or debt-to-income ratio. This includes buy-now-pay-later arrangements, store financing, personal loans, and vehicle leases.

2

Do Not Pay Off Debt Without Reviewing the Numbers

Paying off debt may sound like an automatic way to strengthen a mortgage application, but it is not always the best use of your money.

For some mortgage programs, an installment debt with only a limited number of monthly payments remaining may be treated differently or may be excluded from the debt-to-income calculation. The result depends on the loan program, the payment amount, and its effect on your ability to repay.

Using cash to pay off the account could leave you with less money for the down payment, closing costs, required reserves, inspections, repairs, or moving expenses. Paying off an installment account may not improve your credit score and can sometimes cause a temporary score change, including a decrease.

Before paying off a car loan, personal loan, student loan, or other installment debt, ask your loan originator to compare the debt-to-income benefit with the effect on your cash and credit profile.
3

Do Not Close Credit Cards Without Guidance

Closing a credit card can reduce your available revolving credit and increase your overall credit utilization. That can affect your credit score even when the account has a zero balance.

Keep existing accounts open unless your loan originator recommends a different strategy. You do not need to use an account simply because it remains open.

4

Do Not Quit or Change Jobs Without a Conversation

A job change is not always disqualifying, but it can change how income is documented or calculated. Speak with your loan originator before giving notice, accepting a new position, or changing the way you are paid.

  • Moving from salary to hourly pay
  • Moving from W-2 employment to 1099 or self-employment
  • Accepting commission-only or heavily variable compensation
  • Taking unpaid leave or creating an employment gap
5

Avoid Unnecessary Reductions in Work Hours

If you are paid hourly or your hours vary, underwriting may review your recent paystubs, year-to-date earnings, employment history, and normal work schedule.

A sudden reduction in hours can lower the income available for qualification or create questions that require additional verification. Continue working your normal schedule when reasonably possible and discuss any planned reduction, leave, or schedule change before closing.

6

Do Not Make Large Purchases Before Closing

Financing a purchase can create a new monthly payment. Paying cash can reduce the verified funds available for closing or required reserves. Either choice can affect the mortgage file.

Wait until after closing before buying furniture, appliances, vehicles, recreational equipment, expensive electronics, or major home improvements unless the purchase has been reviewed in advance.

7

Avoid Large Unexplained Deposits and Unnecessary Transfers

Mortgage lenders may need to document where certain funds came from. Large cash deposits, transfers from undocumented sources, and repeated movement between accounts can create extra conditions or delays.

Gift funds, sale proceeds, bonuses, tax refunds, and transfers between your own accounts may be acceptable, but the paper trail matters. Keep bank statements, transfer confirmations, deposit receipts, gift documentation, and sale records.

8

Do Not Miss Payments or Overdraw Accounts

Continue making every payment on time, including accounts you expect to pay off at or after closing. A late payment can affect credit and eligibility.

Repeated overdrafts or insufficient-funds activity may also raise questions about available cash or financial management. Maintain a reasonable cushion in the accounts being used for the transaction.

9

Do Not Co-Sign for Someone Else

Co-signing creates a legal financial obligation. The payment may be counted against you even when another person promises to make it.

Do not co-sign for a vehicle, apartment, student loan, credit card, personal loan, or other obligation before closing without first reviewing the effect on your mortgage qualification.

10

Do Not Start or Change Credit Disputes Without Guidance

Credit disputes can affect mortgage underwriting and automated approval findings. Do not begin, remove, or modify a dispute during the mortgage process without discussing the account and loan program first.

11

Do Not Wait Too Long to Arrange Homeowners Insurance

A high insurance premium can affect your monthly housing expense and qualification. Coverage issues can also delay closing, especially when the property has flood exposure, an older roof, prior claims, wind coverage requirements, or a condominium master policy.

12

Do Not Spend the Money Reserved for Closing

Keep enough verified funds available for the down payment, closing costs, prepaid taxes and insurance, earnest money, inspections, appraisal expenses, required reserves, and moving costs.

The final amount can change before closing, so maintaining a reasonable cushion is safer than spending down to the exact preliminary estimate.

13

Do Not Assume the Loan Is Final Before Closing

Employment, income, assets, credit, insurance, property eligibility, and other information may be verified again. Continue responding promptly and avoid major changes even after the appraisal is complete or an initial approval has been issued.

Frequently Asked Questions

Can I open a credit card before closing on a house?

It is usually best to avoid opening new credit before closing. A new inquiry, balance, or required payment may affect your credit score or debt-to-income ratio.

Should I pay off my car loan before applying for or closing on a mortgage?

Not automatically. A loan with only a limited number of payments remaining may receive different treatment under some mortgage programs. Paying it off could reduce funds needed for closing and may not improve your credit score. Ask your loan originator to compare the options first.

Can paying off an installment loan lower my credit score?

Paying off an installment account may not increase your score and can sometimes cause a temporary score change, including a decrease. The result varies by credit profile.

Can I change jobs before mortgage closing?

A job change is not always disqualifying, but it can change how income is documented or calculated. Discuss the change before accepting the position or giving notice.

What if my work hours decrease before closing?

A meaningful reduction may lower qualifying income or require additional explanation and verification, especially for hourly or variable-income borrowers.

Can I transfer money between bank accounts before closing?

Transfers may be acceptable, but they can create additional documentation. Keep statements and confirmations, and ask before moving large amounts.

Can I deposit cash before buying a home?

Cash deposits can be difficult to document. Avoid making large cash deposits without first discussing acceptable sourcing and documentation.

Can I buy furniture before closing?

It is safer to wait. Financing furniture can create new debt, while paying cash can reduce the verified funds available for closing or reserves.

Can I co-sign for someone before closing?

Co-signing creates a financial obligation that may be counted in your mortgage qualification, even when someone else plans to make the payments.

Does the lender check credit or employment again before closing?

Credit, employment, income, assets, and other information may be verified again before closing. Continue paying on time and avoid major changes until the transaction is complete.

Have a Question Before You Make a Change?

A quick conversation can help protect your approval, your closing timeline, and the money you have set aside for your home.

Educational information only • Loan guidelines and individual circumstances vary
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