Now that you are getting ready to buy a home, it’s important not to take on any new debt, or make any major changes in your financial portfolio. Even slight changes in your financial picture may impact your ability to close on a home loan.
Here’s six things we strongly recommend:
1. Don’t make any large deposits or withdrawals
Large deposits can be a “red flag” to loan Underwriters, and they will want proof of where those funds came from. Any new funds from a loan or new debt could put your loan approval at-risk.
2. Don’t take on any new debt or buying anything on credit
In fact, don’t apply for any new credit, because any new credit inquiry can harm your credit score. Even “12 months same as cash,” or “interest-free” financing offers are still debts that can impact your debt to income ratio and put your home loan approval at-risk.
3. Don’t close existing credit accounts
Feel free to pay off the balance on an existing account, but just don’t close it yet. Closing an existing account hurts your credit score. If you are required to pay off any accounts as part of your loan agreement, do so at loan closing to make sure your loan approval is not threatened.
4. Don’t pay down or pay off any collection items
This may seem counter-intuitive, but paying off or paying down any debt that’s been turned over to a collection agency can impact your credit score in the short-term. That’s because any new activity reported to the credit bureaus may put your home loan approval at-risk.
Talk to your Loan Officer before you do anything; because it’s usually best to wait until after your home loan closing to pay off any collection items, unless you’re required to do so as part of your home loan agreement.
5. Don't let a friend or family member pay for any part of your home purchase
This includes the home appraisal, earnest money, down payments, etc. Gifts from family members are allowed under certain guidelines, so talk to your Loan Officer beforehand.
6. Avoid changing jobs or employment status
Your loan approval is based on your income, the length of time you’ve been with an employer, your compensation structure, etc. Be sure and contact your Loan Officer before making any employment changes so we can determine if they will have an impact on your loan approval.
Sorry for the long list of “don’ts,” but we take the job of helping you buy a home seriously, and want to make sure nothing gets in the way of your home ownership dreams.
Buying a home is an exciting step, but it often comes with lots of questions. Feel free to contact us anytime to get answers as you go through the home purchase process.