What Not To Do Before Purchasing A Home
Buying your first home can be as stressful as it is exciting. Between researching neighborhoods, lenders, brokers, school districts, commutes, and everything on your must-have list, it is easy to overlook a thing or two. Avoid doing these 4 things in the 12 months leading up to your home purchase to increase your chances of landing your dream home.
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Don’t Finance New Big-Ticket Items
You’ve worked hard to get your credit score to where it is so that you can make this purchase, now is not the time to put your score in jeopardy with new financing. New financing will increase your debt-to-income ratio which will do you no favors when seeking out the best rate for your mortgage. If you can hold off on buying a new car, big TV, and fancy furniture until after your move, that is the smartest choice.
Don’t Open a New Line of Credit
Contrary to popular belief, opening multiple credit accounts will not improve your credit score- it is actually most likely to do the opposite. The building of good credit is a slow and steady process, it is not something you can try and perfect overnight. Do be sure to keep up with all of your monthly payments on existing accounts. 25% of consumers have reported finding an error in their credit report, so do get your free credit report and comb through it for any potential incorrect entries. Check your credit 6 months in advance to have time to remedy any issues. A good loan officer will be happy to give you a hand with this.
Don’t Switch Jobs
Lenders are looking for stability when they issue new loans as their main goal is to be paid back for the money they have lent. Show them you are a low-risk candidate by holding off on large life changes during this period. Lenders will look at your pay stubs, tax returns, and bank statements before approving you for a loan so it is vital to not have any periods of missing income. You will typically need to provide your most recent pay stubs, and if you do not have any current, you will have to wait until you receive them from your new place of employment. This is primarily a concern in the later stages of your home search when time is the difference between you getting your dream home or not.
Don’t Move Your Money
Lenders will take into account all of your bank records when determining if you are a good candidate for a loan. They will be looking for consistent saving habits and for all large deposits to be well documented. Large amounts of money moving in and out of your bank account with no paper trail will be a red flag for lenders that there may be illegal activity or recent credit changes.