9 Things you should avoid doing before buying a home
1. Purchase a Car. Purchasing the car before buying a home will have an effect on what the mortgage lender determines you can afford for a home. Since a car is such a big ticket item, it can greatly raise your debt-to-income ratio, which lenders use to determine how much of a mortgage you can afford. Ultimately, the car purchase will decrease the amount you can afford to pay for a home.
2. Move Money Between Accounts. When the lender does the work to determine your eligibility for a loan, they will request statements from all of your accounts that contain liquid assets. When you move money around between accounts, especially if they are large amounts, you will have withdrawals in some and deposits in others. The lender will request the documentation for these. Unless you want to keep up with all this paperwork, it’s much easier to leave the money where it is until after you have completed buying a home. Be prepared to provide copies of any checks that are deposited into your accounts. Further, do not make cash deposits if it can be avoided.
3. Change Banks. This can easily be coupled with moving money between accounts. It just creates additional paperwork for you and the lender. To make it easier on yourself and the lender, stay with your current bank until the mortgage is complete.
4. Become Self-Employed. In most cases, lenders want to see at least two years of self-employment before they will approve you for a loan. Wait until after buying a home to become self-employed.
5. Change jobs. Changing jobs creates unpredictability in the number of hours that you will work from one week to the next. As such, the lender cannot determine your gross income to qualify you for a loan. Stay with your current job until you have the loan, then change.
6. Apply For a Credit Card. Even though the inquiry won’t hurt your credit too badly if you already have a good credit score, the additional credit card will cause the lender to question your financial stability for buying a home.
7. Make a Large Purchase. Of course you are going to need furniture when buying a home. Resist the urge to purchase a new sofa set until after you have closed escrow. Big ticket items purchased before buying a home can cause the lender to take a second look at your financial situation.
8. Co-sign a loan for another person. Whether it’s a car loan or a home loan, the payments will be included in your debt, therefore reducing the amount of loan you can qualify for, unless you can provide 12 months of cancelled checks drawn by the person you co-signed for.
9. Overdraw your bank accounts. The lender will want to know how you can afford your new home payments if you struggle to pay your current bills.
When you are buying a home, it is best to stay away from anything that will make it look as though you don’t have your finances under control.
Steve Hirschler
DRE#01703081
REALTOR®, The Tim Wood Group
Coldwell Banker
42153 Big Bear Blvd.
P.O. BOX 6820
Big Bear Lake, CA 92315
stevehirschler@gmail.com
909 866-3481 EXT. 217 CELL 909 725-5889
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