Buying a house can be a stressful experience that often throws unexpected curve balls. You’ll likely come across numerous suggestions telling you what to do when buying a home, but what about the things you shouldn’t be doing? Whether you’re familiar with the home purchasing process or not, these 6 tips on what not to do can make a huge difference in your experience.
- Avoid other large purchases
Making other big purchases such as a car or appliances for your new home can hurt your chances of getting approved for your desired loan. This is a common mistake when home buying as buyers tend to get excited and prematurely shop for home furnishings. While you may have already been pre-approved, the lender will see this new debt on your credit score before closing, which could either change or completely terminate your loan. Not to mention, big purchases significantly decrease the amount of money you will have available to cover closing costs for the home.
- Don’t change jobs
Changing your job can create major complications during the loan approval process. Even though a new job might provide you with a higher salary, many lenders require lengthy inquiries into your employment history. By switching jobs right before applying for a mortgage, you’ll likely be unable to present lenders with enough pay stubs to prove your income. Lenders want to ensure that you will be a safe risk, meaning you have to show stability within your income.
- Avoid moving around large amounts of money
Making large deposits or withdrawals to and from your bank account can be a red flag to lenders when in the process of applying for a mortgage. Before moving around significant amounts of money, make sure to discuss it with your officer in order to ensure no problems arise. Its also a good idea to keep a paper trail of all deposits to be able to prove the validity of the money’s origin.
- Avoid paying with cash for large purchases
While paying with cash for large purchases such as your down payment may be tempting if you have it readily available, its extremely difficult to verify. Not only will this create delays in your closing, it can also make you look less credible to lenders. When looking into your source of income, lenders see large amounts of cash as possible fraud, lessening your chances of being approved for the loan.
If you’ve received a gift for your down payment, its important to consult with your officer in order to validate it.
- Don’t pay off debt
Paying off all of your debt at the same time before applying for a mortgage can actually hurt your chances of getting approved for a loan. Unless recommended by your officer, avoid making these large payments at once. Doing so could potentially hurt your credit score, lowers the amount of money you have saved for closing costs, and negatively affects your debt to income ratio. Having small amounts of debt that you are paying off consistently proves that you are able to make monthly payments.
- Avoid inquiries into your credit
Keep in mind that lenders can, and will, check your credit at any time during the loan approval process. Doing things such as opening a new bank account or applying for a credit card can prompt hard inquiries into your credit. Having your credit pulled can hurt your credit score, and looks bad to lenders if your debt to income ratio is negatively affected.