Congratulations! You’ve found your dream house and now you’re in escrow. Escrow can be a time of excitement and anticipation. But it’s important to remember that your loan is not finalized until the last days of escrow! To be sure that you make it through without a hitch, there are several things you can do to ensure you’re able to close on your dream home:
Don’t Make Any Large Purchases
If you’re in escrow, you should generally avoid making any large purchases such as buying a car or furniture for your new home. Making a large purchase during escrow can negatively affect your debt-to-income ratio (DTI), which could jeopardize your final mortgage approval. If it is absolutely necessary that you make a large purchase before closing, be sure to talk to your lender. Every situation is different.
Don’t Change Jobs
Banks like to minimize their risk and give loans to people they feel are a “safe bet” – people with a history of good financial practices, stable income, and a stable job. Obviously you can’t control everything that happens to you, but if you know you want to change jobs or careers, wait until after you have the keys to your new home safely in hand. And if you absolutely must make a change, a job within the same industry is usually viewed as less risky by the bank, especially if that job change brings a pay increase.
Don’t Open or Close Credit Cards
The lender reviewing your loan will check your credit towards the end of escrow and opening and closing credit cards can affect your credit score. Opening a new credit card usually results in a credit inquiry, which can drop your score a few points. If you do accidentally open a new credit card, don’t charge anything to it until you get the keys and be prepared to talk to your lender to explain the situation.
Don’t Skip Paying Your Bills
You should always pay your bills on time, but during the escrow period it is especially important! Make sure you are staying on top of all your monthly expenses, even while house hunting. If your credit score drops during escrow, you may no longer be able to qualify for your loan. You should also consider paying down your outstanding credit card debt during the billing cycle, rather than waiting for the auto-payment to process. And if you have credit cards you never use, make sure you’re keeping an eye on those as well to be sure there aren’t any annual fees or auto-payments you forgot about.
Do you have more questions about how the escrow process works? Or about buying a home in general? Give me a call at (805) 441-1276!