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It is finally time to buy your first home! You’ve saved and planned, and, before selecting a REALTOR® to guide your search, you need to gain lender prequalification for that mortgage loan. You’ve likely heard a lot of advice about what to do to prepare, but there’s more to it than that. Before you begin looking at homes and negotiating a contract, you should know about some moves that could significantly hurt your chance of getting that home loan. Here are three things not to do when a new home purchase or even a refinance is in your future.
Don’t Change JobsEven if it’s for a better salary, surprisingly, changing jobs can impact a mortgage loan in progress. Mortgage lenders typically require 30 full days of pay stubs for income verification. A job change can delay your loan closing until the lender has proof of 30 days of employment.
If you’re looking to go part-time or contract, or are getting ready to retire, hold off until your mortgage is closed. Because your lender will use your current income to qualify you for the loan, any reduction in income or change in job security could cause the loan to be denied.
Don’t Disturb Your CreditYour credit score is critical to getting the best rates, the best loan options, and the lowest cost for mortgage and homeowner insurance. Now is not the time to miss or be late on credit card or other monthly payments, such as car loans. Make all your payments on time during this critical period, and do not open or close any credit accounts or lines of credit. It’s also a good idea to check your credit report. You can get a free copy at AnnualCreditReport.com. If you notice unsolicited credit inquiries, use the 800 number provided in the report to stop them. Excessive credit inquiries, and opening and closing credit accounts, are sure-fire ways to lower your credit score.
Don’t Make Major PurchasesPart of the excitement of buying a home is furnishing it with new furniture and appliances, but practice patience. Hold off on any major purchases until after your mortgage is closed. A new credit card account or loan to buy new furniture might be tempting, but it could cause your home loan to be delayed, or worse. If a major unexpected expense arises that cannot be postponed, talk to your lender for advice about the best way to handle it. Remember that even if you have been prequalified for your home loan, the lender will run a final credit check just before closing. Any changes that impact your debt-to-income ratio can be a red flag on your ability to qualify for, and repay, the loan.
Bottom line: Consult the mortgage experts. When planning to buy a new home, stay current on all your payments, and defer any changes to your financial picture until after you are settled in to your new home.
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