A Small Payment Can Cost You Big Buying Power

Taking on just a hundred dollars a month in new debt can quietly wipe out about $20,000 in home buying power. Edgar Ibarra has seen it happen to buyers who thought they were safe because their approval was already in place. The final stretch of escrow is when a small financial decision can turn into a very large problem.

Lenders Can Check Your Credit Again Right Before Closing

Right before escrow closes, lenders can run a final soft check on your credit. If a new payment shows up, your debt to income ratio shifts instantly, and the loan that was approved a few weeks ago may no longer fit. The approval was based on the numbers at the time, and those numbers need to stay the same until you have your keys.

What Edgar Has Seen at the Finish Line

Edgar’s team has seen buyers open a brand new credit card or trade in a car for a higher monthly payment right at the end of the process. In one deal, a new payment almost derailed the entire mortgage. The only way to save it was for the buyer to receive a gift that could be used to pay off the credit card before closing. Solutions like that can sometimes work, but they add stress, and they are never guaranteed.

Freeze Your Credit While You Are Under Contract

The better approach is to avoid the situation altogether. When you are under contract, freeze your financial life. No new furniture financing, no car upgrades, and no new accounts until you get your keys. Waiting a few weeks can protect your approval and your buying power.

Plan Ahead Before Your Next Purchase

If you are planning your next home purchase, connect with Edgar Ibarra so the two of you can plan ahead and make sure this does not happen to you.

Sources

ConsumerFinancialProtectionBureau.gov
Fanniemae.com
Freddiemac.com
HUD.gov
Investopedia.com