10 Things NOT to do When Buying Your First Home
1. Do NOT look for a home without being pre-approved for a loan.
This seems like a no brainer to most people, but buyers sometimes still think they can shop before looking at their finances. In the end, you’ll have a much smoother process if you meet with a Lender first, then start looking for homes.
2. Do NOT suddenly pay off debts and collections or close accounts.
This behavior looks suspicious to lenders and may negatively affect your credit score. Closing accounts that are older actually decreases your credit history, which is bad. Before you make any big financial moves, talk with a trusted professional.
3. Do NOT apply for new credit cards.
Pulling your credit for the purpose of obtaining new credit negatively affects your credit score. It may also make you appear to be desperate for money, which is something lenders don’t want to see right before handing you over tens of thousands of dollars. Makes sense, right?
4. Do NOT change jobs or change your pay structure.
Lenders need to see some income history in your line of work, and if you go from salary to commission (for example), this may cause the loan underwriter to reject your loan request. Before accepting a new pay structure, talk with a Loan Officer.
5. Do NOT consolidate bills.
Again, this sort of action causes you to look desperate or in need of financial help. Plus, by consolidating bills you’re probably either opening new accounts (number 3) or closing old ones (number 2).
6. Do NOT make non-payroll related deposits into your bank account without keeping copies of the checks.
In this lending climate (stormy, at best) loan companies need accurate documentation of where your money is coming from. If you get a check from Aunt Steph for your birthday, it needs to be documented for the loan company to make sure there isn’t any funky business going on. Again, ask your loan officer what needs to be tracked and what doesn’t.
7. Do NOT pack away financial documents (W-2’s, tax returns, bank statements, pay stubs, etc.).
Many new buyers are packed and ready to move before they even start searching for homes. By keeping this type of information “out of the box”, it will allow you to produce these essential papers in order to speed up the process and make sure you are approved and close within your set time frame. If your documents are packed away or in a storage unit, this may delay closing or cause you to lose the house.
8. Do NOT choose a mortgage without researching the different types.
This is where your loan officer comes into play. If a Mortgage Officer tells you what kind of loan you can get without fully asking you a series of questions on your situation, they may not be giving you the best program. Be sure to ask about special first time buyer loans and down payment assistance available. Even if you don’t qualify for these packages, you’ll find out whether the loan officer is really doing their job by helping you choose the best option.
9. Do NOT shop for, lease, or buy a new vehicle.
This should go without saying, but loading yourself with brand new debt (and a lot of it) will more than likely mean no bank or mortgage company will be allowed to lend you money for a home. If you also need a new car while your shopping, try to hold off until you close or consult your loan officer on a strategy.
10. Do NOT incur more debt by making large purchases (like appliances).
I have has clients who were preparing to move into their first home, and accidentally bought appliances on a zero-down store credit card 2 weeks before closing. This caused us to take the husband off the purchase agreement in order for the sale to be pushed through. They got lucky, but I wouldn’t advise anyone else to try the same thing.
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