So you’ve been thinking of buying a new home or investment property for a while but now you may be at a point where you are seriously considering buying. Being prepared to move quickly with an offer once you find the right place is critical. Here’s a list of 13 things you should NOT do…
1. Don’t Change Jobs or Quit Your Job
Let’s start with a biggie: keep your job stable! Changing jobs or becoming self-employed during the home-buying process can really throw a wrench in your plans. Lenders like to see a steady income, and any sudden changes can make it hard to budget and potentially mess up your loan approval.
2. Avoid Excessive Credit Card Usage
This might seem obvious, but it’s worth repeating: buying a home is likely one of the biggest purchases you'll ever make, so keep your finances in check. Now’s not the time to go on a shopping spree. Excessive credit card use can lower your credit score, which might affect your mortgage terms. Make sure all your bills are up to date, and avoid unnecessary spending.
3. Be Honest About Debts
Tempted to hide a few debts on your loan application? Think again. Lenders have a way of finding out your financial history, and omitting debts can be seen as mortgage fraud. Being upfront about your financial situation will allow your mortgage lender to give you the best advice and assistance.
4. Don’t Make New Credit Inquiries
Each time you apply for new credit, it generates an inquiry on your credit report, which can lower your score. Too many inquiries might mean a smaller loan offer, which could hinder your ability to buy the home you want. Keep your credit profile stable and clean during this crucial period.
5. Avoid Changing Bank Accounts
It might seem like a good time to switch banks, but hold off until you’ve closed on your new home. Your loan officer, realtor, bank, and lawyer all rely on your current financial setup. Changing banks can lead to unnecessary delays and confusion, potentially affecting your closing date.
6. Don’t Buy a Vehicle
Thinking about getting a new set of wheels? Hold that thought! Purchasing a car, truck, or van can seriously impact your mortgage approval. Big purchases often require loans, which can alter your financial standing and affect your mortgage terms. Wait until after you’ve secured your home to buy a new vehicle.
7. Protect Your Closing Funds
The funds you’ve saved for closing are crucial, so keep them safe and sound. It might be tempting to dip into that money for something else, but doing so could jeopardize your ability to close on your home. Keep those funds locked away until closing day.
8. Wait on Buying Furniture
We get it—furnishing your new home is exciting! But before you start ordering new couches and dining sets, remember that big purchases can add to your debt load and impact your credit score. Stick with your current furniture for a bit longer, and avoid taking on new debt until after closing.
9. Consult Your Loan Officer Before Large Deposits
Planning to make a large deposit? Check with your loan officer first. Lenders may see big deposits as potential loans, which can affect your debt ratio and mortgage terms. Be prepared to provide documentation for any significant deposits to avoid complications.
10. Don’t Co-sign Loans
As kind-hearted as you may be, avoid co-signing loans of any kind for anyone during the home-buying process. This creates a legal obligation on your part, which could interfere with your mortgage approval. Wait until your mortgage is finalized before co-signing on someone else’s loan.
Bonus Tips:
Here are a few more tips to keep in mind:
11. Get Pre-Approved Before House Hunting
Finding your dream home only to realize you can’t afford it is heartbreaking. Get pre-approved before you start your search so you know exactly what you can afford and avoid any disappointment.
12. Consider All Home-Related Expenses
Don’t forget about the other costs associated with owning a home. Beyond the purchase price, you’ll need to budget for property taxes, utilities, maintenance, insurance, and more. These expenses can add up quickly, so plan accordingly to avoid surprises.
13. Don’t Overextend Yourself with a Loan
While it’s tempting to go for a larger loan, ensure your monthly payments remain manageable. Consider your other financial responsibilities, like bills and groceries, and choose a loan that fits comfortably within your budget.
By avoiding these common pitfalls, you’ll be better prepared for a smooth home-buying experience. Buying a property is a significant financial commitment, so it’s essential to be informed and strategic in your approach. Enjoy the process, make smart choices, and you’ll soon be settled!