If you are planning to buy a home soon, make sure that you are aware of all the factors that can affect your ability to qualify for a mortgage approval. Many people think it is as easy as walking into a bank and saying ” I want to buy a home.” Banks are in the business of lending and making money… they need to ensure you are financially responsible and able to repay possibly the most money you have borrowed to date. To allow for a higher probability for an approval and the best terms, follow these 10 home buying commandments.
Thou shalt not change jobs, become self-employed, or quit your job.
Changing jobs resets the clock. You need 2 years of full time employment or employment within the same field to be a god candidate for a mortgage. Any sudden changes raises a red flag.
Thou shalt not buy a car, truck, or van.
Do not incur any additional debt when you plan to purchase a home. This not only affects your debt-to-income ratio, it also affects your credit score. You essentially just borrowed against your home loan. BAD IDEA
Thou shalt not use credit cards excessively.
I think this is a no brainer but again, do not incur any additonal debt. It shows that you are not responsible financially.
Thou shalt not miss payments.
Your credit score is made up of history of payments. If you show lenders you cannot repay your current debt… do you think they are more or less likely to approve you to take on more debt?
Thou shalt not spend money you have set aside for down payment and closing costs.
Purchasing a home is expensive, let’s be honest. Do not spend ANY money until you have keys to yout new place. There are usually surprise costs so be prepared.
Thou shalt not buy furniture.
Again, NO SHOPPING until you are the legal owner of the property.
Thou shalt not originate any inquires into your credit.
Do not apply for any other credit, loans etc until AFTER you own your home. Inquiries raise red flags.
Thou shalt not make large deposits without checking with your loan officer.
EVERY DOLLAR needs to be accounted for. Do not make deposits or large withdrawals from your account without checking with your loan officer. They can advise on what to do, how to “source” your money etc. This goes back to money laundering, they need to ensure it is your money and not someone using you to “clean” their money.
Thou shalt not change bank accounts.
DO NOT CHANGE ANYTHING that affects your finances in any way until you take ownership of the home.
Thou shalt not co-sign a loan for anyone.
DO NOT and i repeat DO NOT co-sign for anyone for anything. I have 2 kids and I already let them know… I will not be co-signing for student loans, car loans, nothing. If they laps on payment, it affects your credit score. Their debt also becomes your debt and impacts your debt-to-income ratio.
I hope these commandments help you as you start thinking of purchasing a home. Check back on our site for more information on how to make yourself the best candidate for a mortgage approval.