It’s that time of year again, people are on the lookout for the best deals on the market. Eyeing which neighborhoods are the safest and most affordable. Imagining what life would be like waking up in that Pinterest looking home with the big windows and gorgeous front yard.
Searching for homes is easily the best and most fun part of the mortgage process. However, there are several “no-no’s” you must not overlook when finding your perfect home.
Not only do people make the mistake of choosing the wrong shade of grey on the wall, a handful of people find themselves in a financial mess because of several reasons.
Don’t become another sob story and make mistakes that can cost you your future home.
Here are the top 10 “no-no’s” of the mortgage process:
1) DO NOT change jobs, become self-employed, or quit your job
Changing jobs while buying your home can make budgeting and getting a loan approved a difficult process.
Your loan approval could be jeopardized since you listed a different company as your employer, salary and benefits. In addition, changing jobs means a different income.
You won’t know how much it really is or how consistent your bank account will be during each month. It will be difficult to budget; therefore, it will be tricky to plan and anticipate how financially stable you will be.
2) DO NOT use credit cards excessively or let current accounts fall behind
This may be a “duh” or no brainer statement, but, many people tend to overlook the fact buying a home is a big purchase.
Before closing, do not spend an additional amount of money on other things. Also, don’t let other bank accounts fall behind. Although the loan was under one account, the bank looks at all accounts. Be sure to stay up to date with any other payments or loans. If you want to have a higher credit score, make sure to read this guide.
3) DO NOT omit debt or liabilities from your loan application
You may think by not listing any other financial debt or liabilities will help your loan application, you are WRONG!
Don’t be sneaky and try to slide that information through the cracks. The bank knows your financial situation as well as you do. This is also considered a form of mortgage fraud. In the end, you can end up getting a smaller loan than you wanted. Truthfully fill out your loan application and your mortgage lender will be able to help you to the best of their ability.
4) DO NOT originate any inquiries into your credit
Too many inquiries can negatively affect your credit score. A lower credit score means a smaller loan. You don’t want to damage your chances of obtaining a better loan by having too many inquiries. Balance and keep your account clean.
5) DO NOT change bank accounts
Your Loan officer, Realtor, bank and lawyer are familiar with your account and history. Don’t complicate things by switching banks.
This could create lots of unnecessary paperwork and confuse certain parties which bank account you are referring to. In addition, the transferring process may take longer than anticipated and could interfere with your closing date.
Wait until you have moved in to switch banks.
6) DO NOT buy a car, truck, or van
Buying any type of vehicle is usually a pricey purchase. Sometimes requires taking out a loan to make a down payment. DO NOT take out another large loan to finance a new car. By taking out another loan can jeopardize your mortgage loan. If you were to take out another loan while your mortgage loan is in process, your mortgage loan can change drastically. So, don’t harm yourself by trying to treat yourself to a new set of wheels.
7) DO NOT spend money you have set aside for closing
Closing is one of the most important parts of the mortgage process. Don’t even think about touching the money set aside for closing for something else. You may think “but this purchase is for the home!” Well, what happens if that money used ends up making you lose your home? Don’t test your luck and keep that money locked and stored away for closing day.
8) DO NOT buy furniture
This will probably be the trickiest for people not to do. Furnishing and decorating your home is an exciting time. However, buying furniture is an expensive investment.
This could also require taking out another loan. But most definitely setting up monthly payments to pay it all off.
Additionally, this purchase could also harm your credit if you are unable to make the payment, which will harm your mortgage loan. It’s best advised to stick with your current furniture and wait an appropriate amount of time before shopping for new furniture.
9) DO NOT make large deposits without checking with your loan office
Many large deposits require a proof of source. Depositing a large amount of money can look like a cash-advance or a loan, which would need to be included in your debt ratio. If this information is not recorded while requesting your mortgage loan, this can jeopardize the amount you receive.
10) DO NOT co-sign a loan for anyone
Knock on wood nothing jeopardizes your mortgage loan. But, if something were to happen, you don’t want to be relied on for someone else’s loan approval. This loan is technically considered your responsibility too and you can be sued by the lender if payments aren’t made. With that being said, don’t sign any documents that don’t relate to your own loan and wait until your process is over. It’s better to be safe than sorry.
When buying a home, you need to be on the top of your game. You don’t want to agree to anything that won’t benefit you in the long run. Be sure to ask the right questions, do your research and don’t make any mistakes that could have been avoided.
That’s why we’re providing you three bonus tips of what not to do when buying a home.
Here are 3 BONUS tips of what not to do:
1) DO NOT find a home before getting pre-approved
If you start your mortgage process like this, there’s a 50 percent chance that you will become emotionally attached to a home then figure out you can’t afford it. You don’t want to set unknown and unrealistic standards before figuring out your finances. Or, figure out your loan isn’t as big as you expected. Save yourself the heartache and get pre-approved before looking at homes.
2) DO NOT forget about other expenses
Some people just look at the price on the sign, negotiate their way down and sign papers thinking they’ve finally done it. But, did they consider other expenses about the home aside from the final price? You don’t want to forget about the following financial obligations of owning a home:
- a. Association
- b. Property taxes
- c. Utilities/electricity/water
- d. Garbage/recycling fees
- e. Home maintenance
- i. Landscaping
- ii. Interior cleaning
- iii. Repairs
- iv. Installations
- f. Insurance
- g. Permits
Owning and maintaining a home is a huge responsibility. Make sure to be aware of all financial aspects of your home before finalizing any deal.
3) DO NOT take out a loan you can’t handle
Ideally, you want to take out a mortgage loan that helps lower the cost of monthly payments. But, what if in the long run it turns out you can’t keep up with those payments?
This could start the beginning of going into debt. Not to mention, other financial responsibilities you have aside from home maintenance, such as: bills, car or student loans, memberships, groceries or other as needed items. Listen to your financial advisor or loan officer and they can help you determine which loan will best fit your financial situation.
With these helpful tips, there’s no way you can make a mistake when buying a home. Remember to have fun and be smart with your choices, because these will be the ones that will make the biggest impact in your life.