What Not to Do Before Taking Possession of Your New Home

by Sheldon Johnston and Sara MacLennan on 22. Jun, 2009 in Investing in Alberta Real Estate, Tips for Home Buyers

Gord McCallum at First Foundation Mortgages sent us this list of What NOT to do before taking possession of your new home:

Don't quit your current job.

Don't do anything that will reduce your income (ie switch from full time to part time).

Don't apply for new loans or credit (including credit cards)

Don't close accounts with zero balance

Don't co-sign a loan or mortgage for someone else

Don't stop paying your bills

Don't spend the money you set aside for your down payment

Don't make large deposits into your accounts without documents supporting why the amount is being deposited.

Don't make any changes to your purchase contract without letting your lawyer and lender know.

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8 Responses to “What Not to Do Before Taking Possession of Your New Home”

  1. mc 23. Jun, 2009 at 1:57 pm #

    Can someone explain to me why the following is a bad thing to do before taking posession?:

    “Don’t apply for new credit cards

    Don’t close accounts with zero balance

    Don’t make large deposits into your accounts without documents supporting why the amount is being deposited.”

  2. silvio 23. Jun, 2009 at 4:21 pm #

    The first 2 actions have a negative impact on your credit score. The 3rd may be viewed as suspicious by the bank.

  3. Jay 23. Jun, 2009 at 5:27 pm #

    Don’t close accounts with zero balance

    I really dont understand that one??

  4. Gord McCallum 23. Jun, 2009 at 6:29 pm #

    I can hopefully shed some light:

    #1 and #2 revolve around credit score. For many people with good to excellent credit, this won’t have an impact…at the same time, why take the risk? Unless it’s absolutely necessary or under the advisement of a specialist, leave well enough alone until after your mortgage funds.

    #3 – it’s not as much suspicious (possible) as it is to avoid any concerns about a borrowed down payment. By definition in most cases a borrowed down payment is a no-no so the lender will question any large deposits they see on a bank statement when they’re verifying your down payment source(s).

    Unfortunately this list is all based on real-life scenarios that have caused mortgage deals to fall apart – sometimes irreparably. Hope it helps and saves someone a lot of hassle.

  6. silvio 24. Jun, 2009 at 2:58 pm #

    Let me clarify my answer a bit. Closing “accounts with zero balances” refers to debt accounts like a line of credit or credit card, not a chequing or savings account. When you close down a line of credit, you alter your credit ratio. For example someone with a 100K line of credit with 10K of debt on it is viewed upon more favourably than someone with a 10K line of credit with 10K of debt on it. Even though both people have the same amount of debt, the first person is not “maxed out” and creates the impression of having restraint, or being able to have credit without using it all up.

  7. ken 24. Jun, 2009 at 8:30 pm #

    Sounds like Gord’s comments are meant as insurance to protect his broker commission!
    I’f you’re approved for a mortgage, the bank will not run another credit bureau unless the closing date is at least two months past the date they ran the first credit bureau report. If you apply for a mortgage and close within two months, you have nothing to worry about.

  8. mdm 25. Jun, 2009 at 4:27 pm #

    I am not sure Gord has selfish reasons for his post.

    When we purchased our first house, we found out 3 days before taking possession that the seller had (inadvertently) accepted another offer, privately, in addition to ours, which was presented through a realtor.

    Instead of engaging in a long court battle, we withdrew our offer and eventually found another house, 6 weeks later, with a closing date a few months down the road.

    So, a change in our credit rating could have had a negative impact.