5 Things to Avoid Before Buying a Home

Buying a home is an exciting milestone, from making your must-haves list to designing the interior space. However, many potential homebuyers aren’t aware of the things you can’t do when preparing to buy a home.

Here are our top 5 things to avoid as you count down to closing day to ensure a smooth mortgage process.

1. Don’t Make Large Purchases.
   

   Since lenders assess your financial stability based on your credit report and debt-to income ratio (DTI), large purchases like a new car loan, expensive furniture, or even opening a new credit card can temporarily lower your credit score and increase your DTI. These financial fluctuations could cause your lender to re-evaluate your mortgage application, potentially leading to higher interest rates or even a denial.

2. Don’t Switch Jobs.

   Lenders require steady employment with the proof of income. They typically look for at least 2 years of employment history, although you don’t have to have been at the same job for the entirety of that period. A sudden change in employer or income can delay or even jeopardize your loan approval, as it may signal a decrease in financial stability.

3. Don’t Make Large Deposits.
   

   Any unexpected large deposits into your account may raise a red flag or require proof and an explanation. If this large deposit contains gift funds towards your down payment, it’s crucial to talk with your loan officer first. They can provide you with the necessary documentation, such as a gift letter, to keep your loan on track and avoid unnecessary delays.

4. Don’t Miss Payments.
   

   Maintaining a perfect payment history is critical to demonstrating financial responsibility to lenders. A single payment that is past due by 30 days or more can significantly impact your credit score and, as a result, your mortgage application.

5. Don’t Apply for Credit Anywhere.

   Those store cards sound enticing, especially if they can help you save on new furniture and home décor. However, you should avoid applying for new credit until after your mortgage has gone through and you’ve signed all required closing documents. Taking on new credit and increasing your debt-to-income ratio (DTI) makes you appear riskier to lenders, potentially putting your mortgage at risk.

Ultimately, the journey to becoming a homeowner is a marathon, not a sprint. The period between applying for a mortgage and closing day is a critical time when your financial profile is being monitored. By following these key guidelines and avoiding major financial changes, you can help ensure a smooth and successful path to getting the keys to your new home. Your future self will thank you.

Have more questions about the mortgage process?
Connect with one of our loan officers today to get personalized advice and take the first step towards homeownership!