Things Not to do When Buying a House
The excitement of buying a new home can open up your imagination to a whole new world - from interior color schemes to planning your landscaping. Picturing yourself living in your new house is just part of the fun.
But be careful to remain practical before you buy the home. You'll first face the big step of getting pre-approved for a mortgage, and that comes with no guarantees.
Beware that actions you take before the lender agrees to fund your house loan can create obstacles that could potentially kill the deal.
That said, here are some things that you shouldn't do before contract and closing day.
Overuse Credit
Don't use plastic like it's going out of style. You need to keep your available credit as high as possible, and that means keeping low balances on your credit cards. Don't buy a house full of furniture before your loan closes.
You should be careful even with minor expenses. Any new payment is going to have an affect on your monthly debt-to-income ratio, and not necessarily in a good way. Banks will review your past use of credit to determine your interest rate.
Make Mysterious Deposits/Withdrawals
Lenders will keep close watch on your bank statements during the pre-approval process. They'll continue to do so during underwriting.
You'll need to have an explanation for any unusual deposits or withdrawals. The lender will want to know about an unexpected, large deposit to your account; they'll particularly want to be assured that you're not using gifts or unorthodox deposits to pay the bills.
Be Late With Bills
A late payment showing up on your credit report before closing can ruin your deal. Remember: Your payment history comprises about a third of your credit score. Many lenders will require 12 months of consecutive on-time payments to qualify for a home loan.
Co-Signing A Loan
Co-Signing on a loan can be a risky business whenever you make it. But making yourself financially liable for someone else's debt during the loan process is even riskier. Lenders will consider this another financial obligation as they determine your ability to pay a mortgage.
Change Jobs
Obviously, losing your job will create problems during the approval process. But even job-hopping can create hurdles, because lenders love to see stable, reliable income that's going to continue in the future. Even taking a new job in a different field can raise red flags.
