If you are buying a home and getting a mortgage there are some definite things NOT to do!
Things NOT to do leading up to buying a home and especially once your offer has been accepted by the seller and you are under contract.
The DO NOT’S below seem to be common sense but some are misunderstood or ignored as to the importance when buying a home.
DO NOT CLOSE ANY CREDIT CARD OR LIABILITY ACCOUNTS
If you have any credit card accounts or liability accounts that are showing up on your credit report DO NOT close any of them. It is OK to pay them down to help lower your debt to income ratio for mortgage qualifying purposes but closing them can have a drastic short-term impact lowing your credit scores.
It is best to pay them down, but do not close any accounts. Consult with your loan officer to get their advice before closing any accounts down.
DO NOT OPEN ANY NEW ACCOUNTS
Opening new credit accounts will lower your credit scores. When opening new accounts the company giving you new credit will do a credit check and pull your credit. Credit checks lower your credit scores short-term because it says you are trying to get new credit which could have an impact on your ability to pay your current liabilities. Furthermore, it also says your debt to income ratio could be increasing making you a bigger credit risk.
Consequently, by opening new accounts it could have a negative impact on your ability to obtain a mortgage. Again check with your lender before opening any new credit accounts when you are considering buying a home and especially when you are under contract to close on a home.
DO NOT MOVE MONEY AROUND
DO NOT move huge amounts of money around within accounts or deposit large amounts of money that cannot be explained.
When buying a home the money you have for the downpayment needs to be seasoned and verified.
To avoid questions from the lender, you may want to use “seasoned funds” for your down payment. Basically, seasoned funds are funds that have been in your bank account for at least the last 60 days.
“Seasoning” funds is easy. You just get your money together, stick it in a bank account (separate account for your down payment is often preferable), and wait 60 days before you apply for a loan.
Most lenders will check your bank account statements for the last two months, and when they see the funds have been there for that long, they’ll assume the money is yours and legitimately sourced.
Plus, the 60-day waiting period is enough time for an extra loan to pop up on your credit report. If you did take out a personal loan for your down payment, your lender will know about it from your credit report. So don’t try to trick a lender this way.
DO NOT QUIT OR CHANGE JOBS
Unless you are paying cash for a home DO NOT quit your job or change jobs. Qualifying for a mortgage is dependent upon your income. Mortgage companies towards the end of final underwriting approval do what is called a Verification Of Employment (VOE). The VOE is a document sent out to the human resource department of your employer. Your employer has to sign to verify that you are employed there and what your current income is.
If you quit or change your job prior to closing on your home you could be putting yourself at risk of not qualify for your loan and putting your earnest money at risk.
Consult with your lender before making any employment changes while you are in the home buying process.
BOTTOM LINE WHEN BUYING A HOME
Before making any changes to your credit or employment it is important to consult with your lender to understand the impact it could have on a home purchase.
The smallest things you do can have huge consequences both negative or positive as to qualify for a mortgage.
It is easy to get excited about looking at Tucson homes for sale and shopping for the perfect home. Set yourself up for success and always consult with your lender before making any changes to your credit and finances.
HOMES FOR SALE IN TUCSON
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