Six Things You Should NEVER do When Buying a Home
1. Don’t go buying a lot of junk, or even quasi-junk. Draining your savings or running up credit card debt to buy a new living room set, a big-screen TV, or a new car could make a difference in your interest rate and whether you even qualify for a mortgage. Avoid spending money until after the closing is completed, whether by credit or cash. Keep your debt down and as much money in your bank account as possible. Your lender will check bank and credit card account history, in some cases more than once.
2. Don’t change jobs. Unless it can’t be avoided through such things as drastic location changes, experts say it’s best not to change your employment picture until after closing. A worse move is to change from a salaried position to self-employment or commission only positions. Lending institutions like to see steady employment and generally insist that self-employers show a minimum of two years of successful income as demonstrated by IRS Tax Returns.
3. Don’t mess up your credit. Don’t go running around “fixing your credit” without talking to a professional. For example, you may think you’re going to bump your score up a few notches by canceling credit cards, but canceling the wrong ones for the wrong reasons can seriously damage your credit score. Credit experts say it’s important not to have too few or too many open credit accounts, and the best credit is old credit. Another possible pitfall is to transfer all your credit card balances to one card to get zero balances on the others.
4. Similarly, don’t pay your bills — at least not all of them. Paying credit cards down to below 50 percent of the your credit limit is generally helpful to boosting your score, but paying off all your debts is only wise if you still have enough cash when it’s over to take care of your down payment, closing costs and prepays. In other words, don’t deplete your savings to pay off your credit cards.
5. Don’t think about lying. Lenders want to know how much cash you have to put into the house — truthfully. If you’re borrowing the money for a down payment and have to pay it back, it will have an effect on your ability to meet all your obligations. If it’s a gift and doesn’t have to be paid back, that’s fine. Whatever you do, don’t borrow it from your uncle and tell the mortgage banker it’s yours; the bank may ask you to document how long you’ve had it in that bank and where you got it from. A lie could backfire and ruin the whole deal.
6. Don’t do any spring-cleaning. Don’t throw out bills, bank statements or tax returns; a better idea is organizing all the important papers that may be requested by a lender. Such documents may include W-2s, 1099 income statements, recent pay stubs and tax returns for the past couple years if you’re self-employed. While you’re at it, round up your prior title insurance policy, any canceled checks, settlement statements, or other forms of proof that you paid collections or disputed accounts.
Ricardo Cobos is a Mortgage Loan Officer in Raleigh North Carolina expertly assisting financing homes with low interest rates and low down payment Conventional, FHA and VA mortgage loans for move up buyers and first time home buyers alike. Call me at (919)526-0183 or email me your questions , I’m here to help!