While most homebuyers prefer to take possession within a month or two of finalizing the purchase agreement, there are times when a “long closing” is more desirable. For example, you may be waiting for the sale proceeds from an existing home in order to fund the new one. Or, a later date may simply be more convenient based on your personal schedule. Whatever the reason, if you’re financing the purchase with a mortgage, it’s mission-critical that you keep your finances in order during this “hang time.”
Many homebuyers don’t realize that the lender will keep tabs on you after they approve funding on a home. For example, on a 90-day closing, the lender may decide it’s prudent to pull a credit bureau right before you take possession, just to make sure you haven’t done anything silly with your finances since the original mortgage approval.
Why is this?
Lenders approve funding on a property based on a long list of financial criteria. If you decide to play checkers with your finances and in turn throw your financial profile out of whack, the lender can revoke your mortgage. Period.
And if you’ve already gone final on the purchase of a home… you could find yourself in a hot legal mess. Not only are you out of money with which to buy the home, there is now a VERY unhappy homeowner who thought he had the sale of his home in the bag. He has probably started moving on to other things (like a job transfer or the purchase of another home).
A purchase contract is a legally binding document. The seller may decide he’s not in the mood to put his home back on the market. Instead, he may take legal action against the buyer to collect the money he is rightfully owed for the property.
Moreover, you have probably made all kinds of personal and professional arrangements to accommodate this big move. And now you have nowhere to move to.
Nasty situation, yes?
The lesson here: once you’ve been approved for funding on a home, resist the urge to open a line of credit, to buy a new car, or really to do anything significant with your finances. When in doubt, check with your mortgage professional first. Better still, hold off on any major money decisions until after closing day!
Lecture over. =)