Avoid these 5 mistakes when buying a house! These errors can be detrimental and cause the deal to fall apart. It’s unfortunate that many buyers still make these mistakes because they underestimate the impact on their home purchase. The mistakes include financing new items, co-signing on other loans, opening or closing credit accounts, depositing/withdrawing/moving cash around in your bank accounts, and/or quitting or changing jobs. Spare yourself the heartbreak and avoid these home-buying mistakes.
Some invaluable advice for anyone amid their home-buying journey. These are five things you should not do during your home-buying experience to ensure a smooth and successful closing.
1. Hold Off on Expensive Purchases:
Don’t purchase a car, expensive furniture, or any other item that you would need a line of credit for your loan approval depends on your debt-to-income ratio, which could be affected. Lenders will check your ratio again before closing, and increased debt could jeopardize your approval. Prioritize your home over expensive purchases at this stage.
2. Avoid Co-signing on Loans:
Even if you’re not directly responsible for making payments, co-signing on another loan can have a significant impact on your overall financial health. It can affect your debt-to-income ratio, which is a crucial factor considered by lenders when assessing your creditworthiness. This seemingly harmless agreement may become a problem if it pushes you beyond your debt limits, potentially limiting your future borrowing capacity. Therefore, it is always wise to consult with your lender and carefully evaluate the potential risks before agreeing to co-sign for anyone. Taking these precautions can help you make informed decisions and protect your financial well-being in the long run.
According to Nerdwallet.com “This is the biggest risk: Since you will be responsible for the entire loan amount. Co-signing a loan is not just about lending your good credit reputation to help someone else. It’s a promise to repay their loan if they are unable to do so, including any late fees or collection costs” Lenders will have to add this new monthly payment to your debt
3. Refrain from Credit Card Changes:
Avoid applying for new credit cards or closing existing accounts while buying a home. Lenders value stability and consistency in your finances. Even if you don’t use them, any changes can impact your credit report and final approval. Save any credit card changes for after the closing.
Your mortgage application may be affected by your credit score. According to experian.com “The average age of your credit and hard inquiries can impact your score, causing it to decrease temporarily. Additionally, your credit utilization ratio and types of credit also play a role in determining your score. While opening a new credit card may increase your overall credit limit, it is important to keep your credit utilization ratio under 30% to maintain a good score”
4. Coordinate Unusual Deposits with Your Lender:
To maintain transparency and comply with legal requirements, it is important to inform your lender before depositing large sums of cash into your bank account. Similarly, any unusual deposits, withdrawals, or significant changes to your bank accounts should be communicated in advance. Keep in mind that lenders value stability and consistency in financial transactions.
Following The Mortgage Reports large, undocumented bank deposits can raise concerns for mortgage lenders as they may indicate an unacceptable source for down payment, required reserves, or closing costs. A deposit exceeding 50% of the total monthly qualifying income for the loan is considered large. If the source of a big deposit cannot be proven through documentation, the mortgage lender will disregard the funds and only use verifiable funds to qualify for the home loan. If the verified funds are insufficient, additional savings from an acceptable source will be necessary.
5. Job Changes Should Be Handled Carefully:
Changing jobs or quitting your job during the home-buying process can be risky. While changing jobs might be more acceptable, it comes with its own set of challenges, including potential delays in closing. It’s crucial to consult with your lender before making any job-related decisions during this critical time.
DON’T make a career change until after your loan closes. It is important to demonstrate income stability.
Final Outcome:
In conclusion, navigating the home-buying process requires careful consideration of your financial moves. By avoiding these five common pitfalls, you increase your chances of a successful and stress-free closing.
If you have any questions or need further guidance, feel free to reach out to The Young Team
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