Managing Your Finances Before Closing on Your Home

Buying a home is an exciting journey, and closing is the final step. Whether you’re a first-time homebuyer or a seasoned pro, properly managing your finances in the days leading up the big event is a vital part of a successful closing.

This guide outlines the important steps to take and mistakes to avoid before closing on your home.

Financial Planning

Having a well-thought-out financial plan will help ensure that your homeownership goals can become a reality. Let's look at financial tips to help align your finances and navigate the complex homebuying process:

Start Saving Early

Start putting away some money for your dream home as early as possible. Set up automatic transfers from your salary or checking account to a separate savings or investment account to stay consistent.

Boost Your Credit Score

If you have a low credit score, take immediate steps to boost it. Check your credit report for errors and resolve any inaccuracies that may be dragging your score down. Pay all debts to minimize your credit utilization ratio and boost your overall score.

Get a Co-Signer

A co-signer can be helpful if your income or credit score isn’t strong enough to qualify for the loan on your own. Since their income will be factored into the affordability calculations, the co-signer guarantees your mortgage payments will be paid to the lender.

Sometimes, the co-signer can also compensate if your credit is less than perfect. You and the co-signer should understand the financial and legal obligations before co-signing a mortgage loan. Both co-signers are legally responsible for repaying the loan in full.

Avoiding Financial Mistakes Before Closing

Missteps can lead to delays, added costs, or even the loss of your loan approval. Here are some common financial mistakes to avoid when buying your home:

1. Making Another Large Purchase on Credit While Applying for a Home Loan

Opening a new credit account for a car or furniture during your mortgage process often affects your credit score. Lenders check your credit before approval and before closing. New major purchases can increase your interest rate, slow the approval process and put your home loan at risk.

2. Changing Jobs or Income Streams

It’s best to wait to switch jobs until after closing day. Even a better-paying position needs three to six months of paychecks before a lender counts that income. Changing jobs now means you'll likely need to start your mortgage application over from scratch.

3. Missing Loan or Bill Payments

A late payment might drop your credit score, but a missed payment can remain on your credit report for up to seven years. If you miss a payment, reach out to the creditor to explain the situation — some may agree to remove it if the balance is paid or if it was a rare mistake. To avoid future issues, take steps to track your bills closely, like setting calendar alerts or linking payments to auto-debit.

4. Opening or Closing Credit Accounts

Opening new credit accounts may lower your credit score, so you want to avoid this while applying for a home loan. Even just applying for new credit accounts beyond your home loan can lower your credit score.

Closing credit accounts is not as damaging. However, leaving an account open with a paid balance and showing on your credit report as available/unused credit usually positively impacts your credit score. Just leave them with a zero balance and in good standing.

5. Making Undocumented Cash Deposits

Lenders question large cash deposits in your bank account. That stack of saved bills under your mattress? It won't help with closing costs unless it's been in your bank account for months. Put any cash into your bank now, not the week before closing. When it's time to pay, get a cashier's check from your regular bank.

6. Co-Signing Loans for Others

Co-signing a loan ties your credit score to someone else's payments. Skip co-signing for someone else while house hunting — one late payment from them could wreck your mortgage approval.

7. Ignoring Lender Communications

Unopened emails and missed calls from your lender could delay your closing date. Each document request needs attention — whether it's a bank statement, pay stub or tax return. Your lender can't move forward until they have every piece of paperwork in hand.

8. Skipping the Final Walkthrough

The final walkthrough is an important step in the homebuying process. Ideally, it should take place as close to the closing date as possible before you sign the paperwork. This is your opportunity to inspect the home one last time and check for any issues that may have been missed earlier.

9. Failing to Lock Your Mortgage Rate

Mortgage rates shift up and down daily. While you wait to close on your loan, a rate increase could add hundreds to your monthly payment. Higher payments might push your loan application outside the lender's limits — especially if you're already stretching to qualify.

Ask about locking your rate when you first meet with lenders. Most offer 30- to 60-day locks, usually for a small fee. Once locked, that rate stays put until you close — no guessing about your future mortgage payments.

What Are the Requirements When Closing on a Home?

Closing on a home involves multiple roles, from the title officer managing the process to the title company ensuring clear ownership.

A title officer manages all the paperwork that needs to be done to transfer the ownership of the home. You will actively participate in the closing process alongside the home builder and title company. Below is a list of typical tasks to complete, with the responsible party noted in parentheses:

• Finalizing the Loan (you) – Review and sign the "Closing Disclosure." Verify loan terms and costs.
• Title Search and Insurance (title company) – Ensure clear title ownership and create title insurance.
• Walkthrough (you) – Conduct a final walkthrough to confirm the home’s condition.
• Pay Closing Costs (you) – Contribute the funds needed for the down payment, fees and costs (usually via a bank wire or cashier’s check).
• Closing Day Appointment (you) – Attend the closing meeting to sign documents.
• Transfer Ownership (title company) – Transfer the property title and record the title with the county recorder.
• Mortgage Activation (title company) – Your lender funds the loan, and you officially become the owner.
• Receive the Keys (you) – Welcome to your new home!

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