Buying your first home is an exciting experience. However, it can also get quite confusing and overwhelming. Not only do you have to find the right house, but you also have to qualify for the financing which can be a big hurdle in itself. You need to ensure your credit is good, your income is good and steady month after month for the past 2 years. And you need to ensure you have sufficient money for down payment and closing cost.
One of the biggest mistakes when you’re getting ready to buy your home is not being aware of your credit. No one likes to get unpleasant surprises at the last minute. After finding your dream house and you are in an excited mood, then you sit with a financing guy and he pulls your credit report and finds that you have a history of late payments and collections, thereby having a low credit score. The mortgage guy then tells you that you are denied of financing and can’t buy your dream house. Ouch!
Don’t go searching for your house and finding your dream house without get your financing in place first. Sellers won’t likely consider offers from buyers without seeing your pre-approval letter. The pre-approval letter will state the amount of financing you are qualified for. When you include the pre-approval letter together with your Offer, the seller will know that you are serious and you have the money to buy the house. Another mistake is not working with a buyer’s agent. Trying to search for a home on your own is time-consuming and complicated. A buyer’s agent can help you narrow down your choices, show you the houses that you have chosen and help you make an informed decision. The buyer’s agent fees doesn’t come out of your pocket, their fees are paid by the seller and so their services are FREE to you. Also, in the middle of the process of buying your house, don’t go applying for new credit. The financing people will check your credit in the beginning and again just before the closing before giving you the green light. You need to maintain your credit and finances all through the process till you have closed on the house. That means not opening new lines of credit or closing existing lines of credit. Doing so can lower your credit score and increase your debt-to-income ratio—both key reasons for financing to denied. Instead, wait until after you’ve closed on your home to take out new lines of credit (like a car loan or a new credit card). Thinking of buying your home but having difficulty qualifying for financing? We can help. OwnerFinance specializes in helping people get financing to buy their home in spite of blemishes in their credit report, insufficient down payment, inability to show consistent monthly income as for self-employed people, don’t have green card or citizenship status, etc.
Just as opening or closing lines of credit can ding your score, so can running up existing accounts. Again, keep your credit and finances stable until you close on your home. Use cash instead, or better yet, delay buying new furniture or a television until after closing.
Another big no-no when buying your house is making large deposits or withdrawals from your bank accounts or other assets. If the financing people see large amounts of money suddenly coming in or going out, it might look like you got a loan, which would impact your debt-to-income ratio.
You can use a gift from a relative or friend toward your down payment. However, you would need to show documentation to source the deposit and verify that the donor isn’t expecting you to pay back the money.
Also, avoid changing your job as it may complicate your financing. If you were pre-approved for financing based on a certain income and job, any changes before closing can be a red flag and delay your closing. For approval, you generally must provide proof of two consecutive years of employment and income. When you change jobs, that continuous record of income and employment is disrupted, particularly if you take a lower-paying job. Whenever possible, financing people will recommend waiting to switch jobs until after your loan closes.
Questions? Contact:
Amin Shah
Shahclan Boston – OwnerFinance
Boston, MA -USA
Phone 617-787-5151
Email: aminshah@shahclan.boston