Massachusetts Home Buyer Guide

You're almost to the finish line.

With guidance from your exclusive buyer agent, you have finally had a fair offer accepted on a home that meets your wants and needs in the extremely low-inventory environment that is the Greater Boston real estate market. The home inspection went well enough. Your real estate lawyer had your back during the purchase and sale agreement negotiations.

What could go wrong?

If you worked with a loan officer who not only checked your credit report and credit score (also known as a FICO Score) as part of the pre-approval process but also reviewed paystubs, two years of tax returns, w-9s, and bank and brokerage statements, you should be confident. Unfortunately, a few wrong moves can derail a homebuyer's dream of owning a home by causing a delay in closing or making the buyer ineligible for the home loan for an extended period.

1. Do not buy furniture, appliances, or other expensive household items: Before the closing, your lender will check your credit report and credit score again. If you purchase big-ticket items using credit before the closing date, your credit score might decline, and your debt-to-income ratio may stray outside the parameters acceptable to lenders. Taking a cash advance on a credit card to make purchases will have the same adverse effect.

2. Do not apply for any new credit: While you're at the big box stores reminding yourself that you should not buy a new washer and dryer until after the closing, ignore the discounted offers for opening a store credit card. Taking on more credit and debt can affect your credit score and debt-to-income ratio

3. Do not change jobs, quit your job, or become self-employed: If you leave your current position, you no longer have the income to pay back your loan, and the lender will not proceed with lending you money. If you start a business, the lender will want to see two years of tax returns for your self-employment, thus ending any chance you will receive money to buy a home for two years. If you change jobs and remain in the same field, you will likely delay your closing until you can provide at least one paystub from your new employer.

4. Do not make large deposits without a paper trail: Lenders need to know where all a homebuyer's money is coming from to make sure that the homebuyer is not taking on more debt. Any large deposits, typically $1,000 or more, will cause a red flag. If you are expecting to receive a cash gift, a bonus from work, or an inheritance, you should let your lender know as soon as possible. Check with your loan officer before making any deposits before the closing.

5. Do not switch banks or needlessly move money around: Your lender will track your money. The money you must transfer from a brokerage or other account to close on your house or condominium should happen sooner rather than later and only after you have informed your loan officer. Again, lenders are concerned homebuyers might be taking on more debt.

6. Do not close any existing credit cards: What's important to understand about closing credit card accounts is that doing so may lower your credit score. Closing a credit card reduces your total available credit, and your action might increase your credit utilization percentage on your remaining credit cards and lower your credit score.

7. Do not co-sign a loan: When you co-sign a loan you become liable if the person you co-sign for fails to pay the debt. Since you might become responsible for the balance of the loan you sign, a lender will consider the note you co-signed additional debt, causing a debt-to-income ratio issue.