10 Ways Home Buyers Interfere With Their Home Purchase
Buying a home is one of the biggest investments many of us will ever make in our lifetime. It takes planning, patience, and proper execution. You hired a rock star agent, located the right house, they successfully negotiated the terms for you and now you’re under contract. Cue the financing process. Now is NOT the time to do any of the following –
1. Close Accounts
Account closure increases your debt to income ratio which can in turn cause it to go above the permitted threshold and result in a loan denial. It can also lower your credit score. If you’re considering closing any accounts check with your lender first.
2. Open Accounts
Just say no to those bright 0% balance transfer offers that arrive weekly in your mailbox. Now is NOT the time to open any new accounts. Sure they might be a way to save money but, they can also decrease your credit score and that’s not what you want when trying to buy a home. There will be plenty more bright offers rolling in after you close on your house. Just say no in the meantime.
Sure that new shiny car is gorgeous and it can also be the reason you can’t buy that beautiful home you’ve fallen in love with. Taking on a new car payment while working to obtain financing for a new home is a big no no. Don’t even tempt yourself with a test drive.
4. Major Purchases
Since we’re talking cars let’s also mention that you want that new shiny (insert X item here) and you can charge it. Put the plastic away when buying a home. Making a major purchase can impact your credit score, raise your debt to income ratio and cause a chain reaction of disaster for your home loan. Possibly a higher interest rate or even worse a denial letter.
5. Continue Making Your Payments
Do not miss any monthly payments while going through the loan process. Just continue to pay your debts as you normally would. If you do miss a payment contact your lender immediately to see what the impact is and if there’s a solution to resolve the problem.
6. Job Change
While changing jobs during the lending process doesn’t automatically mean you won’t qualify it will without a doubt create more paperwork and if your income changes could lead to a denial letter. Lenders are looking for consistency in employment and a Verification of Employment (VOE) is very common when obtaining a home loan. Many loans require a 2 year work history and underwriters will need to document and verify any gaps in employment and change income. Do your best to avoid a job changing during the financing process, you’ll thank yourself later.
Who doesn’t love cash? Not many of us but, lenders have to have a paper trail to be able to source where it came from. Do not make any large cash deposits unless you can source where the money came from. Without being a being able to source the deposit it cannot be used as your down payment or to verify your income.
8. Lender Communication
If your lender asks you for something, it’s because they need it for your loan not because they like collecting documents. Yes it’s stressful and a lot of work but, becoming a homeowner will be well worth it. Respond to all lender communication as quickly as possible.
Don’t hide anything from your lender. It’s kind of like hiding something from your Mom when you were a kid…you know she’s going to find out eventually and so is your lender. Be honest and upfront, they are there to help you and if you’re trying to hide anything it’s only going to hurt you.
10. Be Consistent
Do as little with your credit as possible while going through the financing process. Transferring funds, large deposits, name changes, co-signing on a loan all need to wait until after closing. The less changes to your credit the better when working to get your home loan approved.
If you have any questions or concerns on a financial decision while you are working to get your home loan approved ask your lender before you move forward. They are there to help you and can provide you with the expertise you need to get approved and proceed to settlement.