It goes without saying that buying a home is a big financial decision. Securing a large enough down payment, budgeting appropriately, and making sure your income can cover mortgage payments all come with homeownership.
The majority of home buyers will need to apply for a loan in order to buy a home. Your credit score, debt-to-income ratio, and income will all be considered and will dictate the type of loan you receive, its interest rate, and the loan terms. You can also help your cause by avoiding certain decisions during the loan approval process.
Any unusual activity with your credit cards, bank accounts, and spending may impact your finances and signal a red flag. Lenders will be monitoring your various accounts and portfolios, and any abnormal actions may create concern and reduce your chances of being approved for a loan.
As a result, here are some words of wisdom during the loan approval process:
Avoid Any Expensive Purchases
Plan ahead and think about any large purchases you may have to make. If an expensive purchase of a car, appliances, plane tickets, travel, etc., is absolutely necessary, make sure it’s done before you apply for the loan. Pricey items can and will impact your financial situation. Or, if you can, wait unless after you’ve closed on your new home to buy big-ticket items.
Keep Your Present Job
Your lender will want to see a consistent salary from the same employer or a steady stream of income from clients. Any change may create issues and cause for concern so hold off making any shifts in your employment status.
Don’t Move Money Around in Your Accounts
Remember these three words: Keep it Simple! Don’t cause undue confusion by transferring money between accounts. Your lender will be looking at money movement and it’s important to keep the picture as clear as possible. The approval process may be held up if there is unnecessary movement between your accounts.
Don’t Apply for New Credit Cards or Close Out Current Cards
Your lender will be reviewing your payments to credit card companies so it’s imperative that you keep your present cards. Credit cards play an important role in your credit rating and whether you pay your debts on time or not. As a result, keep all credit cards active and don’t close out cards, even if you aren’t using them. Conversely, don’t muddle the picture by opening up new line of credit with a new card.
Pay Your Current Loans and Credit Cards on Time
The mortgage company needs assurance that you will pay your mortgage each month. As a result, they will be closely monitoring whether you pay for student loans, car payments, credit cards, etc., on time. Don’t skip these payments!
Avoid Making Any Large Deposits
Again, your lender wants to see consistency in your financial picture. Perhaps a relative suddenly provided you with a big check or you sold that collector vehicle in your car that had been unused. Regardless of how you came into some money, hold off on depositing it until after your loan has been approved. Although you may think that extra cash will improve your chances of acquiring the loan, it will most likely just cloud the process.
Don’t Change Banks
Like credit cards, it’s important to be consistent with your banking during this time. Now isn’t the time to switch your accounts to a different bank or financial institution. After your loan is approved, there will be plenty of time to change to a new partner.
Don’t Spend Your Savings
This isn’t the time to be dipping into your savings. Trying to make up for a shortfall by borrowing from your savings account may send the wrong signal to your lender. Just like avoiding transfers between accounts, keep your transactions quiet during this time.
Bottom line, it’s best to wait until you close on your home before making any large changes in finances and in your life!
Are you thinking of buying a home in Denver? Check out Usaj Realty and find a professional to help you through the process. They will professionally guide you through the home buying process and help you find a home that finds your needs and lifestyle.