It’s a Buyer’s Market… even so if you’re depending on someone else to provide the money for your purchase … that is you’re going to have a mortgage… you’ve got to be aware of and follow certain rules to keep the deal together.
In the excitement of realizing a dream… getting that new home… I have seen buyers do things that have resulted in their dreams being crushed. Over the years I have seen many deals that have been delayed (and even killed) by seemingly insignificant actions… Play it safe… follow these Do’s and Don’ts to protect your deal.
- Don’t make any large purchases like a new car or a bunch of new furniture. New debt comes with it, including new monthly obligations. New obligations create new qualifications. People with new debt have higher ratios…higher ratios make for riskier loans…and sometimes qualified borrowers no longer qualify.
- Don’t apply for new credit. It doesn’t matter whether it’s a new credit card or a new car, when you have your credit report run by organizations in multiple financial channels (mortgage, credit card, auto, etc.), your FICO score will be affected. Lower credit scores can determine your interest rate and maybe even your eligibility for approval.
- Don’t close any credit accounts. Many clients have erroneously believed that having less available credit makes them less risky and more approvable. Wrong. A major component of your score is your length and depth credit history (as opposed to just your payment history) and your total usage of credit as a percentage of available credit. Closing accounts has a negative impact on both of those to the determinant of your score.
- Don’t co-sign other loans for anyone. When you co-sign, you are obligated. With that obligation comes higher debt-to-income ratios, as well. Even if you swear you won’t be making the payments, the lender will be counting the payment against you.
- Don’t change bank accounts. Remember, lenders need to source and track assets. That task is significantly easier when there is a consistency of accounts. Frankly, before you even transfer money between accounts, talk to your loan officer.
- Don’t deposit cash into your bank accounts. Lenders need to source your money and cash is not really traceable. Small, explainable deposits are fine, but getting $10,000 from your parents as a gift in cash is not. Discuss the proper way to track your assets with your loan officer.
- Don’t change jobs. A new job may seem like a perfect opportunity… But any change in employment status will be scrutinized closely and even if the job is for an increase in pay may create a less favorable outlook, as far as your lender is concerned. This is especially true if you are making a change in the type of work you do.
- Do pay your bills on time. A single late payment can modify your credit score sufficiently to kill the deal. Even if it’s only a few dollars… the impact can be devastating!
- Do keep a sufficient balance in your checking or savings account to cover the money you must bring to the table … even if you are on a no money down deal… last minute expenses could arise that will need to be covered by you in order to close. My advice is Save, Save, Save!
- Do consult your loan officer before doing anything that remotely reflects on your financial situation. The best advice is to fully disclose and discuss your plans with your loan officer before you do anything financial in nature. Any blip in income, assets, or credit should be reviewed and executed in a way to keep your application in the most positive light.
This is truly an exciting time for the homebuyer… keep these rules in mind and make your dream a reality.
May the market be with you.
