5 Mistakes to Avoid Like the Plague When You are Buying A Home
Your loan has been approved, after months of looking you have settled on the right home, and your closing date is just around the corner. Everything appears to be in order so what could possibly go wrong at this point?
Actually, a lot could still go wrong. Until you have signed the paperwork and are drinking champagne in your new house, it’s not actually yours. And unfortunately, things often go south due to a mistake the borrower makes.
We don’t want this to happen and you certainly don’t want this to happen. So to help this process move along smoothly and seamlessly, here are five mistakes to avoid like the plague when you are buying a home:
1. Don’t run out and buy new furniture
We get it, you finally found your dream house. And now you can’t wait to pick out that brand new living room set, blinds, clock that will sit on the mantel and 72-inch flat screen.
But here’s the thing, suddenly spending large sums of cash doesn’t look very good to your lender. And yes, you can find furniture stores that will offer you financing options but this is a bad idea. The last thing you should be doing is adding new items to your credit report.
What to do instead:
Have patience and use smart financial habits. We understand how exciting it is to buy a new home but take things one step at a time. Get through closing and give yourself time to actually move into the house and get settled before you start trying to fully furnish it.
2. Don’t make any sudden credit decisions
Between the time when you apply for your home loan and the closing date, don’t make any sudden credit decisions. Don’t max out your existing credits cards and don’t immediately go out and open a new one.
The reason why is very simple: the bank could change its mind and turn you down for your loan. Banks only lend money to people they believe will actually pay back that loan. By taking on more debt, your debt to income ratio could exceed the bank’s guidelines.
What to do instead:
Once the loan process has begun, continue with the same spending and lifestyle habits you have always had. Your credit will continue to be monitored until the day you sign your closing papers and any meaningful changes could put your loan in jeopardy.
3. Don’t try to hide important financial information
One of the biggest mistakes borrowers will make is trying to hide pertinent financial information from the bank. Alimony, child support payments, outstanding student loan debt…all of this will show up on the application whether you are upfront about them or not.
If you are honest from the get-go, many of these issues can be dealt with.
What to do instead:
Let your lender know about any relevant financial information. And if you are applying with a spouse or a partner, make sure they have been upfront about all of their financial information as well.
Look over your credit report and inform your lender of any debt that isn’t listed. And if you unexpectedly lose your job during the loan process, make sure you inform your lender immediately.
4. Don’t deposit large sums of cash into your bank account
Common sense would have you believe that the more money you have in your bank account the better your chances are of securing a home loan. So it makes perfect sense to deposit the $7k you just received from selling your car, right? Unfortunately, this is not always true.
First of all, not all large cash deposits are created equal. For instance, your bank probably won’t ask you to verify the source of your IRS refund. But if you recently deposited a large, unexplained sum of money then your lender will ask for the source of the income.
What to do instead:
Wait to deposit any large sums of money into your account until after closing day. If you can’t wait, be prepared to show where that money came from. The bank has to verify that you didn’t open another credit source or do anything to jeopardize your ability to pay back your loan.
5. Don’t schedule vacation around your estimated closing date
Yes, you’re in the middle of closing on your home but how can you possibly miss your Grandma’s 90th birthday party in Tallahassee? To put it simply, leaving town for any reason while you are in the middle of closing on your home is a bad idea. As you move closer to your closing date, you will want to make it easy for your lender to get in touch with you. Any unexpected glitches could end up pushing back your closing date.
What to do instead:
Ideally, you won’t schedule any travel plans around your closing date. However, if it absolutely cannot be avoided, make sure you stay in close contact with your real estate broker. And make sure you have provided them with all the necessary paperwork they may need while you’re away.
Want to explore your specific Own vs Rent scenario? Our mortgage advisors can help.
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