Things to Avoid Doing Escrow When Buying a Home in Arizona
After weeks or months of searching and finally found your dream home and your offer accepted by seller. Escrow is opened, you or your buyer agent deposited the earnest money to title company and now you are in escrow process. You likely think you’ve all but sealed the deal. You won’t officially be a homeowner for another 30 days, give or take. A lot of things can happen during the next 30 days. Many times credit, income, and assets are verified the hour before you have signed your final loan documents. That means that keeping your finances stable and being readily available to answer any questions over that 30 day time period is pretty important.
DO NOT quit your job or change jobs
To close an escrow, you need to show the lenders you’re financially responsible. Lenders usually prefer buyers with consistent job history. If your employment change during the escrow period, the lender may decide to reexamine finances based on the new information, which could extend the escrow period and lead to denied loan applications.
DO NOT make any major purchases
Don’t make any new major purchases that could affect your debt-to-income ratio. Your just under contract, it is tempting to go shopping for your new home ranging from a new appliances to a furniture. During escrow, don’t swipe out your credit cards for high dollar purchases. If your debt-to-income ratio changes appreciably while you’re in escrow, the lender will notice. Lenders look closely at this ratio when determining financial status, and they may deny a mortgage application if your debt spikes during escrow.
DO NOT buy or lease a new car
Even if you’re making car payments now, swapping out a new car for the same monthly payment, or lower, can still affect your credit. The dealer will still pull a hard credit check to make sure you can afford the current payment. Chances are, what you’ll owe on the new car will be more than what you owed on your old. This will affect your DTI and your credit score.
DO NOT establish new credit
Cash-back cards, 0% card for new furniture or store credit card, that’s a big no no. This will cause more “hits” on your credit rating which can reduce your credit score. New debt is akin to an inability to make a mortgage payment as well as the newly taken on debt. Wait until after your transaction has closed to accept new credit.
DO NOT close any credit accounts
Even if you realize that you never use a certain credit card. Do not cancel that line of credit while you are waiting to close the purchase of your home.
DO NOT co-sign
DO NOT co-sign for anyone, for any reason, for anything. By you co-signing, you agree that you are also be responsible new debt. Approval for a loan is based on DTI, new circumstances may mean a lack of stability, this can lead to outright loan denial.
DO NOT change your marital status
How you hold title is affected by your marital status. Be sure to make both your lender and the title company aware of any changes in your marital status so documents can be prepared correctly.
DO NOT allow any credit inquires
Prior to the close of escrow, your lender will run your credit one more time to ensure that no new purchases or inquires have been made. The presence of new inquiries is a major red flag for new debt.
DO NOT paying off existing accounts
DO NOT paying off existing accounts, unless your lender requests it. If you loan officer advises you to pay off certain bills in order to qualify for the loan, follow the advice. Otherwise, leave your accounts as they are until your escrow closes.
DO NOT change bank accounts
DO NOT change bank accounts or transfer money within your existing accounts. The lender want to know your reserve in your bank account. Typically the lender want to know that the fund inside same account for at least 60 days.
DO NOT make large deposits
Do not make large deposits into your accounts outside of your paycheck. Your lender will ask the source of the deposit. Also, avoid cash deposit, as cash is hard to trace. Remember, whatever the source of the funds, the lender needs to know where it’s from, and typically has to be in your account for at least 60 days.
DO NOT send in late payments
DO NOT send in late payments, or incur late fees for anything. This may affect your credit score. If your credit score suddenly drops while you are in escrow, the lender is sure to investigate.
Bottom line
During the escrow period, don’t do anything that could negatively impact your credit score. There are many things that can cause a credit score to drop, and you should try to avoid all of them. If you are thinking of conducting these activity or any of these situation happen to you, consult with your loan officer immediately.
Swee Ng, Realtor and Phoenix East Valley resident specializing in win-win real estate transaction through great communication and fighting for his clients’ best interest. After all, this is more than real estates, this is about your life and your dreams.
If you are looking to buy or sell your home in Phoenix AZ and surrounding area, we hope you will consider us. Contact us today for complimentary consultation.
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