Don’t do these Five things when you are buying a home!
When preparing to buy a home and qualify for a mortgage, here are several crucial dos and don’ts that can have a significant impact on your chances of success. To help you navigate this important process, here are five things you should avoid from the day you decide to purchase a home until the day you have the key in your hand:
- Making Large Purchases:
It’s important to avoid making significant purchases, such as buying a new car, furniture, or other big-ticket items on credit, during the home-buying process. These new debts can increase your debt-to-income ratio and affect your ability to qualify for a mortgage. Lenders evaluate your debt-to-income ratio to determine your ability to handle monthly mortgage payments. Therefore, it’s wise to hold off on large purchases until after you’ve secured your mortgage. - Job Changes or Unstable Employment:
Lenders prefer borrowers with stable employment records, as it provides a sense of financial security. Changing your job or having an unstable employment history can cause concern among lenders, potentially leading to delays or denial of your mortgage application. It’s advisable to wait until after you’ve obtained your mortgage and closed escrow on your home before considering any major career transitions. - Applying for New Credit:
While it may be tempting to take advantage of discounts or special deals by applying for new credit cards, it’s essential to refrain from doing so during the pre-approval and underwriting process. (The underwriting process doesn’t end until the day your loan funds, you close escrow and get the key to your home) Each time you apply for credit, it generates a “hard inquiry” on your credit report, which can lower your credit score temporarily. Multiple hard inquiries within a short period can raise red flags and signal to lenders that you may be taking on too much credit, which can impact your mortgage terms. - Neglecting Your Credit Score:
Your credit score plays a vital role in determining your eligibility for a mortgage and the interest rates you’ll be offered. Failing to monitor your credit and address any issues can hinder your chances of securing a favorable mortgage. Make sure to review your credit report for inaccuracies and take steps to improve your credit score, such as promptly paying bills and reducing outstanding debts. Better credit can lead to better mortgage terms, so proactively managing your credit is key. - Emptying Your Savings:
Buying a home typically requires a down payment and funds to cover closing costs and potential moving expenses. It’s essential to avoid depleting your savings during the home-buying process. Lenders want to see that you have a financial cushion to handle unexpected expenses and emergencies. Additionally, having some reserves in your bank account demonstrates financial responsibility and strengthens your mortgage application. - Don’t Move Money (Bonus)
Your Mortgage lender is looking for where your money is where your money comes from and what you spend your money on. So don’t be moving money between checking, savings, or money market accounts. Don’t withdraw large amounts of cash because the bank can require you to document all of that and explain it. So it’s just easier to get through the homebuying process by not moving large amount of money if you giving large gift from someone you’re gonna have to document that.
In summary, when preparing to buy a home and qualify for a mortgage, remember to refrain from making large purchases on credit, avoid job changes or unstable employment, refrain from applying for new credit, pay attention to your credit score, and maintain a healthy amount of savings. By following these guidelines, you’ll increase your chances of securing a mortgage and achieving your homeownership goals with ease.
