Congratulations! You’re officially under contract on your dream home. While the excitement is well-deserved, this phase requires careful financial management to ensure nothing jeopardizes your mortgage approval. Even small missteps during this critical time can delay or derail the process.
To keep your path to homeownership smooth, here’s a guide to what NOT to do once you’re under contract on a house.
1. Don’t Make Large Purchases
It’s tempting to start buying furniture, appliances, or other items for your new home, but hold off until after closing. Big-ticket purchases can increase your debt-to-income ratio, potentially causing your lender to question your ability to afford the mortgage.
Pro Tip: Even if you’re offered “no interest for 12 months” financing, this can still show up as debt on your credit report.
2. Don’t Open or Close Credit Accounts
Opening new credit cards or closing existing accounts can disrupt your credit score, which lenders monitor throughout the underwriting process. Even minor changes could impact your loan terms or approval.
Pro Tip: Wait until after closing to make any changes to your credit profile. If you’re unsure, ask your lender before making a move.
3. Don’t Change Jobs Without Consulting Your Lender
A job change can be a red flag for lenders, even if it’s a promotion or a move to a higher-paying role. Lenders prefer stability, and any shift in employment could require additional documentation or delay your closing.
Pro Tip: If a job change is unavoidable, communicate with your lender immediately to discuss how it might affect your loan.
4. Don’t Make Large Bank Deposits Without Documentation
Lenders will closely monitor your bank accounts during the underwriting process. Large, unexplained deposits can raise questions about the source of the funds and may require detailed documentation.
Pro Tip: If you receive a financial gift or other large deposit, notify your lender and provide a clear paper trail, such as a gift letter or bank statement.
5. Don’t Miss Any Payments
Your payment history is critical, and missing a payment on any account—credit cards, car loans, or other bills—can lower your credit score. This could cause your lender to reconsider your loan terms or even withdraw the offer.
Pro Tip: Set up automatic payments or reminders to ensure all bills are paid on time.
6. Don’t Co-Sign Loans for Anyone
Co-signing a loan makes you legally responsible for the debt, which increases your financial obligations. Lenders will factor this into your debt-to-income ratio, potentially putting your mortgage approval at risk.
Pro Tip: Politely decline any co-signing requests until after your home purchase is complete.
7. Don’t Change Your Spending Habits Drastically
Sudden spikes in spending or withdrawing large amounts from savings can raise concerns for your lender. Stability is key during the mortgage approval process.
Pro Tip: Stick to your usual spending habits and avoid dipping into funds earmarked for your down payment or closing costs.
Why These Steps Matter
Once you’re under contract, your mortgage lender is working to finalize your loan approval. Any financial changes during this time can raise red flags and slow down or even derail the process. By maintaining financial stability, you’ll help ensure a smooth path to closing day.
Key Takeaways: Stay the Course
- Think of your finances as “frozen” during the contract-to-closing period.
- Always communicate with your lender before making any significant financial decisions.
- When in doubt, err on the side of caution and consult your real estate agent or mortgage lender.
Remember, you’ve worked hard to get this far in the home-buying process. By avoiding these common mistakes, you’ll stay on track to turning that “under contract” status into “closed and moved in.”
Have questions or need guidance? Reach out—I’m here to help!