All the signs may be pointing to yes. Everything in your life may be in line and in favor of you purchasing a home. Even though you may see a lot of green lights to move forward, there are a few stop signs that are good to recognize and listen to. The home buying process can be filled with a lot of fun “yeses,” but there are a few “noes” as well. Here are 7 things not to do before buying a home.
Don’t Change Jobs.
You may get an exciting, new job offer. It may provide you the opportunity to exit a job you aren’t thrilled about and enter a field that better matches your passion. If your new employer really wants you, though, they’ll be willing to wait until after you close on your home. Switching to a new job can demonstrate financial instability to a lender, and that can cause them concern. Your lender will like to see a consistent and steady employment history. Even if the professional move is your decision, that may not be reflected in the information they review. Hold off on a job change until after you have the house keys in hand.
Don’t Change Banks.
The same emphasis on financial stability applies to changing banks. Changing your banking account from one institution to another while going through the pre-approval process can have an impact on your ability to qualify for the home loan. Your current bank may have angered you. You may want to move to a local bank in your new town. There may be an outstanding offer at a different financial institution. Whatever may motivate to move your account, wait to change your bank until the closing process is complete.
Don’t Make a Major Purchase.
Moving to a new home and/or a new town can make you aware of purchases you need to make. Some are relatively small and insignificant. Others, however, may be larger. Washer/dryer, refrigerator, furniture, or a car… there are some big-ticket items you may find that you need for the new chapter in your life. While you are applying for your home loan and until the transaction closes, it’s best to wait to make these purchases. Part of the lender’s job when processing your application is to determine how responsible you are with your available credit. Incurring additional debt during the time you’re being evaluated for your mortgage could increase your debt-to-income ratio and work against your ability to qualify.
Don’t Fall Behind on Payments.
The fun part of being an adult: you get to set your own bedtime. The not-so-fun part of being an adult: bills. Whether credit card statements, student loans, car payments, or utilities, your monthly budget includes bills. To help ensure your credit score is not negatively impacted, pay your bills on time. The benefit of living in a technology-driven world is that you can often set automatic withdrawals for your regular payments. If that is not an option, set a reminder on your smart phone or regularly-used calendar that will alert you that a payment is due. Falling behind on payments could affect your credit score enough to make a difference on if you qualify for your mortgage or not.
Don’t Co-Sign on Someone Else’s Loan
They may be your brother, your mother, one of your children, or your favorite great aunt, but while you are going through the home loan process, do not co-sign on someone else’s loan. It will seem like a good deed, but while hoping to qualify for a mortgage, it’s likely to be detrimental. Even though you do not appear as the primary person on the loan, when you co-sign, you are still financially obligated for the loan, and it will appear on your credit report. Feel free to help out someone in this way after you’ve closed on your loan.
Don’t Make Large Withdrawals and/or Deposits.
Suggesting that you not make large withdrawals while purchasing one of the largest financial investments of your life may seem like a no-brainer, but no large deposits too? To which we say, “No large deposits too.” Mortgage lenders like to see that the money on which they are determining your eligibility to qualify is “seasoned,” meaning that it has been in your accounts for at least two months. It demonstrates financial stability and your ability to cover your mortgage payments. Recent large deposits can raise red flags and raise questions of fraud.
Don’t Open a New Credit Card.
The offers never stop coming, and you may be tempted, but even if you are offered a credit card with 0 percent interest or 0 payments for a certain amount of time, turn them down. While something like a $600 stove for 0 percent interest or 0 payments for 6 months could derail the purchase of the home. Additionally, you want to avoid inquiries into your credit. When a mortgage lender sees credit inquiries, it can assume you’re working to take on more debt, even if that is not the case. It’s best not to do anything like this that could put a “ding” in your current credit situation.
We want your mortgage journey to be smooth and seamless as possible. Avoiding the above potential pitfalls can help you soon say the words you’ve dreamed of saying, “I am a homeowner!”
Senior Vice President | National Production