When buying a home you’re often told about the things you should do, when it’s the things you SHOULD NOT do that can stall loan approval or make it harder to get a place of your own. Buying a home in today’s climate is stressful enough, don’t add to the strain by complicating your ability to get a loan once you’ve found the home of your dreams. Let’s take a look at 5 things not to do when buying a house.
1. Don’t make any major purchases
As soon as you get your pre-approval in place and start shopping for a house, you need to stop shopping for high priced items like cars and furniture. Your lender will review your debt to income ratio (DTI) as part of your pre-approval and making major purchases will add debt, thus changing how much you are qualified to purchase. It’s simple, close on your house, THEN go out and buy the furniture or car you’ve been eyeing.
2. Don’t change jobs
One of the things mortgage lenders look for when you’re applying for a loan is stability. Part of that involves having the same job for an extended period of time. That varies a little, depending on the type of mortgage you are after. Let’s break it down:
- Conventional – lenders are looking for two years of job history. If there are gaps in your employment, they will want you to be at your current job for at least six months.
- FHA – just like the conventional loan, lenders want to see two years of job history and if there are any gaps they will want you to be at your current job for at least six months.
- VA – If you’ve recently left the military or graduated from college, you may not have two years of new work history. If you can show continuity between your current job and your military occupational specialty, training, or formal education, a lender views it as less of a “gap” in work history and more of a shift.
- USDA – requires 12 months at your current job and the USDA encourages lenders to look at the last two years of employment history. If you’re using retirement income, Social Security benefits, or an alternate type of income, you may be eligible for a different time frame.
3. Don’t miss paying your bills
Paying your bills on time will keep your credit score strong. The higher your credit score the easier it is to qualify for lower interest loans.
4. Don’t loan money
Buying a home is a major responsibility and you will want to keep your finances as stable as possible. This is especially important after you’ve gone through the pre-approval process. If you’re asked to loan money, it may help to have a response ready in advance. For example, you might say, “I’m sorry. I would normally be able to help you out, but I’m going to need every dollar at my disposal to purchase a home.”
5. Don’t co-sign a loan
When a lender checks your credit report, a loan you cosigned for will show up as though it’s YOUR loan. This will also affect your DTI. If someone asks you to cosign a loan, it’s because they don’t qualify on their own. The reason for that is either they haven’t had time to build a sufficient credit history or they have a record of not paying bills, which means they are too risky to qualify. In either case, by cosigning, you take on responsibility for their behavior.