10 things you DON’T want to do when preparing to buy a homeSearching for a home in Encino, Sherman Oaks, Studio City, or pretty much anywhere can be stressful enough. Thinking about the piles of paperwork and financial documents you need to compile (and keep current, if your search is taking a while), and the fact that your credit score can make or break your loan… It’s a lot to worry about. One thing you don’t want to do is accidentally impact your credit score and history, just as you’re about to go into escrow! Here’s a valuable list of don’ts provided by our mortgage specialist, Jeff Fink (let me know if you want his contact info).
- Don’t change your job before applying for a home loan. Along with that, now is not the right time to become self-employed or quit your job. You want to show lenders stability, which means you’ll be less likely to default on the loan.
- Don’t change banks.
- Don’t buy a car or truck or any other form of transportation that you have to finance. Buying one increases your debt-to-income ratio and that’s something loan officers don’t want to see.
- Don’t buy furniture on credit before buying your house. Like financing a car, charging big-ticket items increases your debt-to-income ratio and now is not the time.
- Don’t be late on your credit card payments or charge excessively.
- Don’t make large deposits into your bank accounts. Lenders like the money that will be your down payment to be sitting in your account for at least two months – what they call “seasoning” – so that the funds don’t just appear out of the ether.
- Don’t lie on your loan application. Sounds simple, right? But don’t leave out any debts or liabilities you have or fudge your income. It’s fraud.
- Don’t co-sign a loan for anyone. Even if you’re not the one making the payments on that loan, it increases your debt-to-income ratio.
- Don’t have inquiries made into your credit. Looking for new credit translates into higher risk for lenders.. But opening credit accounts within a short period of time represents some risk and your credit could take a hit. It’s probably not a huge factor in your calculating your ability to repay a loan but why take a chance at this juncture?
- Don’t spend your money for closing costs. Part of the price of financing a loan is the closing costs and you’ll likely have some responsibility for paying them. Make sure you have enough for your share of the obligation.