What NEVER to Do Before Buying a Home
My Top Secrets for Buying a Home Series
Buying a home for the first time can be confusing. That’s why the tips and strategies you’ll find in this 8-week series will set you on the right path. It’s my own unique approach and a “behind the scenes” glimpse of what you should look out for and consider when starting your own search for a home.
Did you know that some normal — even harmless everyday activities — could hurt your chances of buying your dream home? You want to avoid any slip-ups that might make your lender think twice about processing your mortgage loan.
Here are eight things that you should “never, ever, ever, ever” do during the time you are searching for a home:
1. NEVER Change Jobs
Stability is key when seeking approval from lenders, so the months leading up to your home purchase is not a good time to seek other employment or start up any new endeavors.
While enhancing your career and moving up is important financially, you should wait until after you’ve moved in, or at least signed the final documents, to switch jobs or pursue any entrepreneurial interests.
Remember, lenders don’t want to take risks and are looking to loan money to someone who they know can pay it back. They will continue to check on your employer status up to closing day. Leaving your current job, can be a red flag to them! (And don’t retire!! Yes, that actually happened on one of my deals, needless to say, that deal fell through).
2. NEVER Pay-Off Creditors (without checking with your lender first)
Sounds counterintuitive, but it’s not. Certain loans require you to have certain “reserves” in the bank to qualify. So, you might actually do more harm than good if you pay off your credit cards, student loans or any other debt you have. Check with your lender first before you pay anything off.
Having debt is not always a bad thing and may not be as big of an obstacle to your owning a home as you think. So don’t pay it off unless your lender tells you to do so.
3. NEVER Make Major Purchases
One of the fun things about buying a new home is all the other new stuff that comes with it. Often, people want new furniture, appliances, and the list goes on and on!
Most major purchases today require credit, and that means you don’t want to have a large number of inquiries on your report during the loan process. Plus you don’t want to have a higher debt-to-income ratio than necessary before you close on a home.
Your best bet is to hold off on buying anything major until you have completely finished the mortgage process and you’ve moved in. That new car can wait!
4. NEVER Have Late Payments
You should always make payments on time whether you’re planning on buying a home or not. However, in the months leading up to your looking for a home, you want to be especially careful not to be late on car payments, insurance premiums, credit cards, even parking tickets! This could derail the approval of your mortgage or increase your interest rate.
5. NEVER Accept Out of Ordinary Bank Deposits
Lenders prefer to see proof that the bulk of your down payment fund has been in your account for at least two months — also known as “seasoning.”
As stated before, stability is key, so you don’t want it to like look money suddenly moved into your account out of nowhere. This looks suspicious and may signify that you may be depending on family members or others for your down payment. (There is a way to get a loan or gift from family though!) The lender wants to know that you can afford and maintain a mortgage.
6. NEVER Agree to Co-sign
Your home buying process is not the time to co-sign anything! Even though you’re not the one making the payments, and no matter how much you trust your beneficiary, co-signing a loan, no matter how small, increases your debt-to-income ratio.
And a default on the part of the borrower can jeopardize your entire loan process.
7. NEVER Have A Change in Your Assets
Don’t forget that you’re already making a major investment — buying your new home! It’s not the time for other investments even if the stock market is bullish. Other investments would deplete your liquid assets that you need to make lenders comfortable, so you’re better off waiting until you’ve officially bought your new house.
8. NEVER Miss Paying Your Taxes
Most traditional lenders will require at least the last two years of your tax returns. With your authorization, they can get them directly from the IRS, unless you can provide it to them. Without these returns, you will not get your mortgage. I’ve had deals fall through right before closing because buyers did not file recent tax returns. If you have not filed, let your agent and your lender know right at the start, so this issue can get resolved well before closing.
Next week in My Top Secrets Series, we’ll be talking about all the Red Flags to watch out for along the way to your dream home. Stay tuned!
I'm Carmen Cotto-Rivera and I love helping first time home buyers, including Spanish speakers, buyer their first home. I also love helping sellers looking to move up or downsize to their next home. Let me know how I can help you make your real estate goals come true.
921 Pleasant Valley Av
Mt. Laurel, NJ 08054
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