Navigation

Wednesday, September 2, 2015

5 Financial Don'ts for Homebuyers


Deciding to buy a home is one of the biggest decisions you’ll likely ever make. If finding your dream home wasn’t hard enough, you also have to make sure your finances are in order to purchase it. Here are a few simple steps that you can take to make the buying process smoother.

1. Don’t Change Jobs or Quit Your Job.
While a job change could be better for you in the long run, changing while you’re searching for a new home, or even after securing a lender, could delay your settlement. The loan amount your lender will approve is based off your average income for the past 24 months, so any change in income or pay structure matters. This also includes accepting a promotion. Although a pay raise at your current employer likely won’t stop you from receiving the loan, it could delay the process without the proper documentation. For any job change, your lender will need to see an offer letter, a role change letter and your most recent pay stub reflecting the income change.

2. Don’t Buy a Car (Or Make Any Other Large Purchases).
You’re getting a new house, why not get a car to go along with it? While it might look nice in your new driveway, purchasing a new vehicle before your closing could put your loan in jeopardy, even if you can afford it. Lenders take into account your debt-to-income ratio. If you tip the scales by committing to more debt by making a large purchase or co-signing for someone else’s purchase, you could be denied.

3. Don’t Make Any Changes to Your Credit.
Don’t close any credit card accounts. Don’t apply for a new credit card. Don’t miss a credit card payment. Don’t personally check your credit score. All of these things may seem fairly harmless – closing a credit card even seems beneficial – but each of these things can lower your credit score. Any change in your credit is a major red flag for lenders, so don’t make any large purchases and pay your bills on time.

4. Don’t Make Large Deposits Without a Paper Trail.
If you’re fortunate enough to find yourself with a wad of extra cash that you need to deposit, you’ll want to contact your lender before heading to the bank. They’ll be looking at your bank statement before closing, so a large deposit can raise eyebrows. You’ll likely be required to provide paperwork explaining where the money came from.

5. Don’t Dip into Your Savings.
A mortgage is vital in purchasing your new home, but the price of the house is not the only cost you incur when you buy. There are other expenses like a down payment and closing costs that you’ll be expected to have money on hand to cover. Dipping into your savings is concerning to lenders. Make sure your funds stay in place.

All of these tips boil down to one thing - lenders want to feel secure. Avoid major changes in your financial habits during the months leading up to your home purchase. When it comes to your finances and buying a house, consistency is key.


AddThis