As soon as you decide to purchase your new home you’ll find that your friends, family, and close ones will have a lot of suggestions and will be happy to share their advice, even if you didn’t ask for it. There are many steps to get your “financial self” ready for the purchase, we always talk about what to do when buying a home, but what steps are best to avoid?
1. DON’T open new credit cards or close existing accounts
It might be tempting to simply close your credit card account after you paid it off – out of sight out of mind. Right? Unfortunately, that’s not the case. If you close your credit card account it will only show creditors that you are not in control of your spending and it will affect your credit score even more so than if you had a small balance (under 30% of the limit). Please ask your lender before opening or closing any accounts.
2. DON’T use credit in any way
An exciting time, new home, new chapter, new furniture….wait, wait, wait – please do not spend any extra money on furniture, car, appliances or any retail credit cards.
Nothing that requires pulling your credit, credit pulls will bring your score down and might disbalance your debt to income (DTI) ratio, which means you might be ruining your chance of getting preapproved for your new home.
3. DON’T contact the Listing Agent
This one is easy, you should have your own representation and contacting the Listing Agent directly won’t save you money. In fact, the Listing Agent represents the best interest of the Seller and might use all of the knowledge and experience to get a few extra dollars from you.
4. DON’T change or quit your job
VOE – Verification of Employment. The bank/underwriter for your future home loan will be calling your employer to make sure you work there and they plan on keeping you around, therefore you will be able to afford your mortgage. Stay put, since the last VOE might be on the day of closing.
5. DON’T change banks
Banks like a paper trail, stick with your bank, send everything underwriters need / request, and feel free to maneuver the day after you fund your closing.
6. DON’T be late on payments
Late payment = Credit Score Hit. Try to avoid any credit drops, it will be much smoother for the pre-approval process.
7 .DON’T make large deposits or withdrawals with cash
Paper trail, we’ve talked about it. You have to have enough money in the account to cover the down payment and if anyone is gifting you more than $2000 make sure you have a gift letter from them, underwriters might ask for their bank statements too.
8. DON’T co-sign on loans for anyone
Co-signing means they are using your credit discipline and as soon as this line is open for them, it will show up on your credit score as another credit line.
You don’t want that, Debt to Income (DTI) should be somewhat the same from the time you approve to the time you close.
9. DON’T lie on your loan application
There are so many questions, so many forms, and ways to verify the info you provide. Don’t try to sneak something in and hope they won’t notice. Just be honest, it will be better for everyone in the long run.
10. DON’T spend EXTRA money
Maintain regular spending patterns. Nothing more, nothing less. It is definitely exciting to purchase new things for your new home, but focus on the home first and after you close – feel free to open a shopping spree.
Bottom line
Make sure your bank, job, credit, and DTI are the same at the closing as it was at the time the lender approved your home purchase. Good luck with your new purchase!
