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!
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.
Shahclan Boston – OwnerFinance
Boston, MA -USA