What Not To do Before Applying for a Mortgage
The weeks before you buy a home, especially in a competitive housing market, are critical in your financial life. Major changes to your financial status could impact your ability to qualify for a mortgage, even if you're pre-approved. If you're a home buyer who is in escrow or who is thinking about making an offer on a home, here's what you need to know.
Don't Take a New Job
Mortgage lenders prefer borrowers who have been at their job for a long time. Home buyers who change jobs before they buy a home may not be able to get a mortgage at all. For a home buyer who is simultaneously looking for a new job, it's best to halt the job search until after the home loan is final.
Home buyers who do get a job while in escrow need to be prepared for the possibility that their loan will be denied. In general, mortgage lenders like to see borrowers staying in the same industry. Buyers who do decide to take a new job should stay in their own industry or, better yet, with the same employer.
Don't Borrow Money
Borrowing money (like taking out a car loan) is problematic in multiple ways. Borrowing usually involves a credit check, which can temporarily reduce the borrower's credit score. Borrowing also changes the buyer's debt-to-income ratio, which in turn can reduce the amount of money that the buyer is able to borrow.
A buyer who would like to purchase a home can prevent problems by avoiding taking out additional loans until after they've bought a home. Once the mortgage is approved, then the new homeowner can borrow money from other lenders, if need be.
Don't Close Any Accounts
This may sound backwards, but closing accounts can have a negative impact on a person's credit. Home buyers who close open credit cards can expect to see a dip in their credit score.
In addition, closing the credit card or account that has been around for the longest time can shorten the length of the buyer's credit history. Both of these things can impact the buyer's ability to get a mortgage. Unless there's a good reason to close an account, it's best to leave all accounts open during the home buying process.
Don't Make Any Major Purchases
Major purchases that are applied to a credit card can impact the buyer's debt-to-income ratio. Major purchases that are paid for out-of-pocket can impact a home buyer's ability to make a down payment on home. Avoiding major purchases until after the home loan is approved can help the buyer get approved for the best mortgage possible.
Don't Change Your Financial Status
Ultimately, the goal of any home buyer should be to avoid making changes to their financial status until after the mortgage has been approved. Once the home is purchased, the home buyer should feel free to borrow money, make major purchases, and change jobs if need be.
Contact Your Lender for More Advice
If you're a Cameron Station home buyer who would like to borrow money to purchase a home, contact a reputable lender in your area. Your lender can answer your questions and give you information that can help you avoid making mistakes that could lead to complications with your home mortgage. Call today for more information.