In our last blog installment, we discussed some pre-buying do’s. Equally important to your home buying preparatory work are several pre-buying don’ts:
1) Don’t Go Credit-Crazy
As previously mentioned in the “do’s” post, it’s smart to monitor your credit in the months leading up to a home purchase. With every new line of credit opening, your credit score gets dinged. So if a creditor solicits you for another amazing credit card with major perks, don’t bite during this crucial time. Avoid any financial transactions that require inquiry into your credit health.
2) Don’t Get Behind on Bills
Having a late payment hit your credit report before closing can impact your ability to get the loan you need. Payment history comprise about a third of your credit health. Many banks require 12 consecutive months of on-time payments to qualify for a loan in the first place. A 30-day late blemish could cause lenders to rethink your loan application all together.
3) Don’t Switch Jobs
Any change in employment is a significant risk from a lender’s perspective. Lenders desire clients with stable, reliable income and generally will ask you to provide a picture of income stability during the underwriting process, as stability equates to the less likelihood of default in the their eyes. During this crucial time of financial scrutiny, don’t switch jobs, don’t go entrepreneurial and become self-employed, and certainly don’t quit your job.
4) Don’t Buy Anything Major
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. Additionally, don’t buy furniture or major appliances before buying your new house. Like financing a car, charging big-ticket items negatively impacts your financial standing. Keep yourself in good graces with your lending institution by minimizing your large expenditures.
The process of purchasing a home can be long and complicated. From the moment you decide to become a homeowner until you close on your dream house, you want to provide a clean bill of credit so that your home gets financed favorably. Even if you have good credit at the beginning of the journey, there are ways to blemish your qualifications and make lenders think twice. Being fiscally absentminded or slightly irresponsible with your credit health could cost you down the line.