10 Things You SHOULDN'T Do Before Buying A Home

Keep on the straight and narrow while applying for a loan 

16 Nottingham Drive; Candler, NC

By Diana Lundin (source)

You’ve made a decision to buy a house. From now until you close, you want to keep your nose clean when it comes to getting your home financed. Even if you have good credit, there are things you can do to make lenders think twice. It’s your responsibility to make sure that doesn’t happen.

Here are 10 things you don’t want to do while you’re in the process of buying a home.

1. Don’t change your job before applying for a home loan. Along with that, now is not the right time to become self-employed or quit your job. You want to show lenders stability, which means you’ll be less likely to default on the loan.

2. Don’t change banks. Like your employment, you want your banking history to show stability.

3. Don’t buy a car or truck or any other form of transportation that you have to finance. Buying one increases your debt-to-income ratio and that’s something loan officers don’t want to see.

4. Don’t buy furniture on credit before buying your house. Like financing a car, charging big-ticket items increases your debt-to-income ratio and now is not the time.

5. Don’t be late on your credit card payments or charge excessively. You need a track record of responsibility and show that you can manage your money.

6. Don’t make large deposits into your bank accounts. Lenders like the money that will be your down payment to be sitting in your account for at least two months – what they call “seasoning” – so that the funds don’t just appear out of the ether.

7. Don’t lie on your loan application. Sounds simple, right? But don’t leave out any debts or liabilities you have or fudge your income. It’s fraud.

8. Don’t co-sign a loan for anyone. Even if you’re not the one making the payments on that loan, it increases your debt-to-income ratio.

9. Don’t have inquiries made into your credit. Looking for new credit translates into higher risk for lenders. If your inquiries are related to your mortgage search, it usually doesn’t affect your credit score because the assumption is you’re rate shopping. But opening credit accounts within a short period of time represents some risk and your credit could take a hit. It’s probably not a huge factor in your calculating your ability to repay a loan but why take a chance at this juncture?

10. Don’t spend your money for closing costs. Part of the price of financing a loan is the closing costs and you’ll likely have some responsibility for paying them. Make sure you have enough for your share of the obligation.

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Buying a Home: Prepare by Getting your Finances in Order

For those considering buying a home, the current real estate market presents some unique opportunities. One of the side effects of the economic roller coaster ride of the past few years is that home prices have gone down and more homes have gone on the market. For buyers, that means more choices and better deals. However, those same tumultuous years can also teach buyers a lesson: Make smart buying decisions and be wise with your finances.

Impulsive buying is never a good idea when it comes to a purchase as significant as a home. You need to be absolutely certain that your finances are in order, and healthy, to be able to get the best deal on your purchase.

There are a number of steps you can take to get ready to buy a home.

If you haven't already, start saving. At the same time, review your credit score and do what you can to either maintain it or work toward healthier credit. Both of these tasks will help make the home-buying process better for you.

Your credit is an important factor in determining the terms under which you can get a mortgage. Broadly speaking, the better your credit is, the better your interest rate will be. Because you'll be paying off your home for years to come, it's important to get the best rate possible.

Start by checking your credit report. You're entitled to one free check of your report, from several credit reporting agencies every year. As much as you need to check your report to find out what shape your credit is in, it's also essential to review it for inaccuracies or fraudulent activity, both of which can have a negative impact on your score.

If your credit health needs some work, take action immediately. Paying bills on time, reducing your overall debt and limiting new credit inquiries can all help to build your credit, but be patient as it can take time for your positive actions to impact your credit score. Nevertheless, the sooner you make the effort, the sooner you'll see results.

Finally, remember to be prudent when deciding how much you can afford for your monthly mortgage payment. While it may be tempting to buy a pricier house, the stress of struggling to make payments could diminish your enjoyment of your new home and even put you at financial risk. One rule of thumb is that most borrowers can afford a home loan that runs about two and a half times their annual salary.

Buying a home is a complex process, but is ultimately very rewarding when done right. By organizing your finances well in advance, you'll help set yourself up for success.

Copyright© 2012 RISMedia, The Leader in Real Estate Information Systems and Real Estate News. All Rights Reserved. This material may not be republished without permission from RISMedia.
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When you're ready to get started, give The Puffer Team a call, 828-771-2300, or visit our website,
www.homefinderasheville.com.