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The 5 Worst Things You Can Do BEFORE Buying a Home

By
Real Estate Agent with Keller Williams Shoreline License #00834127

The 5 Worst Things You Can Do BEFORE Buying a Home

 

 

Helpful tips to make your dreams of home ownership a reality:

The 5 Worst Things You Can Do BEFORE Buying a Home

 

If buying a new home is one of your 2015 new year resolutions, here are some activities to steer clear of while you're on the hunt!

 

Remember that getting pre-approved for a mortgage and even under contract isn't a guarantee. That prefix is there for a reason. Loan pre-approval is not loan approval.

Buyers who don't know any better can inadvertently add obstacles to that path, or even kill the entire deal, between contract and closing day.

Some missteps can be costlier than others. Here's a look at 5 of the worst things you can do before buying a home:

1. GO CREDIT-CRAZY - It's almost become cliche in the mortgage industry, but the warning still bears repeating: Don't buy a truckload of furniture until after your loan closes. The prohibition goes beyond sofas and settees - avoid obtaining credit for any major expense, such as a car, a boat, or, yes, a new bedroom set.

Be careful with even minor expenses. If you absolutely need to obtain new credit or accrue debt before closing, talk to your loan officer as soon as possible.

New payments are going to affect your monthly debt-to-income ratio (and residual income on a VA loan), and not in a good way. Hard inquiries on your credit report could lower your credit score. That might hurt your interest rate in you haven't locked or even knock you out of qualifying range all together!

2. SHUFFLE DOLLARS AND CENTS - Lenders will scour your most recent bank statement as part of the pre-approval process. It's not like they forget about it after that. They'll take another look at your assets and bank records again during the underwriting process. You'll need to explain any unusual deposits or withdrawals. Lenders will require clear documentation and a paper trail if you're putting gift funds toward a down payment or closing costs. Stuffing a wad of undocumented cash into your account is going to raise some red flags.

3. GET BEHIND ON BILLS - Having a late payment hit your credit report before closing can devastate your deal. Payment history comprises about a third of your credit score.

One solitary 30-day late payment can clip 60 to 110 points from your credit score. Maybe not a huge deal if you had an 800 score, right? Possibly. But if that 30-day late blemish is a mortgage or rent payment, some lenders will boot your application altogether. Many will require at least 12 consecutive months of on-time payments to qualify for a home loan.

4. CO-SIGN ON A LOAN - Co-signing a loan is arguably a bad financial move whenever you make it. But it's especially risky during the mortgage lending process. It means you're financially liable for someone else's debt. Yes, that someone else might be the most responsible person on the planet. Lenders will still need to factor that new monthly obligation into your overall affordability profile. Adding one more debt to the list could stretch too thin your debt-to-income ratio assets.

5. CHANGES IN EMPLOYMENT - Probably goes without saying, but losing your job is going to be a big problem. Even job-hopping can present some major hurdles. Lenders crave stable, reliable income that's likely to continue. 

Lenders are likely to slam on the brakes if you take a new job in a different field. Or if you decide to start your own business. Or even if you get a promotion but see some or all of your income shift to a commission basis.

The bottom line: Any change to your employment is significant. Keep your loan officer in the loop, and ask questions when in doubt. The last thing you want is to waste time and money on a home loan that you are not able to get.

We are here to help! Let's put a home buying game plan in place. If you have questions on the home buying process and would like to schedule a FREE, NO OBLIGATION CONSULTATION, please contact us!

 

Joe: (562) 201-1026 / homes@joesopo.com

Linda: (562) 201-1027 / lwsopo@gmail.com

 

Comments (2)

Chris and Maria Jeantet
Shasta Living Real Estate - Redding, CA
Top Realtors in Redding CA

Thanks for posting, these are great tips for potential borrowers.

Jan 13, 2015 03:50 AM
Joe & Linda Sopo
Keller Williams Shoreline - Long Beach, CA
"The Power of Two"

Hi Chris and Maria,

Thank you for your comment. Although some seem pretty obvious, we can never reiterate these points enough. Have a happy 2015!

Jan 14, 2015 01:29 AM