If you’ve found yourself crushing hard on a house you just can’t get out of your head, you’re not alone.
The transition between winter and spring is the time to get a jump on moisture damage and heat loss, make quick work of organizing storage areas and work in some garden prep before spring.
Cynics may scoff, but getting under contract on the right home can turn even the most stoic shopper into a bit of a dreamer. From paint colors to planting a garden, picturing yourself in that property is critical for many buyers.
But leave a little room for pragmatism. Remember that getting pre-approved for a mortgage and even under contract isn’t a guarantee. That prefix is there for a reason. Loan pre-approval is not loan approval.
You’ll have more hurdles to clear before a lender legally commits to funding your home loan. Buyers who don’t know any better can inadvertently add obstacles to that path — or even kill the entire deal —between contract and closing day.
Some missteps can be costlier than others. Here’s a look at five of the worst things you can do before buying a home.
1. Go Credit-Crazy
It’s almost become cliché in the mortgage industry, but the warning still bears repeating: Don’t buy a truckload of furniture until after your loan closes. The prohibition goes beyond sofas and settees — avoid obtaining credit for any major expense, such as a car, a boat or, yes, a new bedroom set.
Be careful with even minor expenses. If you absolutely need to obtain new credit or accrue debt before closing, talk with your loan officer as soon as possible.
New payments are going to affect your monthly debt-to-income ratio (and residual income on a VA loan), and not in a good way. Hard inquiries on your credit report could also lower your credit score. That might hurt your interest rate if you haven’t locked or even knock you out of qualifying range all together.
2. Shuffle Dollars and Cents
Lenders will scour your most recent bank statement as part of the pre-approval process. It’s not like they forget about it after that. They’ll take another look at your assets and bank records again during the underwriting process.
You’ll need to explain any unusual deposits or withdrawals. Lenders will require clear documentation and a paper trail if you’re putting gift funds toward a down payment or closing costs. Stuffing a wad of undocumented cash into your account is going to raise some red flags.
3. Get Behind on Bills
Having a late payment hit your credit report before closing can devastate your deal. Payment history comprises about a third of your credit score.
One solitary 30-day late payment can clip 60 to 110 points from your credit score. Maybe not a huge deal if you had an 800 score, right?
Possibly. But if that 30-day late blemish is a mortgage or rent payment, some lenders will boot your application altogether. Many will require at least 12 consecutive months of on-time payments to qualify for a home loan.
4. Co-Sign on a Loan
Co-signing a loan is arguably a bad financial move whenever you make it. But it’s especially risky during the mortgage lending process. It means you’re financially liable for someone else’s debt.
Yes, that someone else might be the most responsible person on the planet. Lenders will still need to factor that new monthly obligation into your overall affordability profile. Adding one more debt to the list could stretch too thin your debt-to-income ratio and assets.
5. Changes in Employment
Probably goes without saying, but losing your job is going to be a big problem. Even job-hopping can present some major hurdles. Lenders crave stable, reliable income that’s likely to continue.
Lenders are likely to slam on the brakes if you take a new job in a different field. Or if you decide to start your own business. Or even if you get a promotion but see some or all of your income shift to a commission basis.
The bottom line: Any change to your employment is significant. Keep your loan officer in the loop, and ask questions when in doubt. The last thing you want is to waste time and money on a home loan you’re never going to get.
Throughout the mortgage process, it can also be helpful to monitor your credit scores for changes so you can know whether you need to address any problems. To do that, you can use a free tool like Credit.com’s Credit Report Card, which updates your credit scores and an overview of your credit report every month.
Buying a home can be a great investment, and many households dream of starting a family and developing memories in their first home. When it comes to shopping for a property, many first-time homebuyers may be surprised by all the options their real estate agent provides. Luckily, there are several ways prospective buyers can narrow down their home search and find a property that best meets their needs.
The simplest way prospective buyers can begin their home search is to contact a real estate agent and go through a process of elimination by creating a simple checklist that outlines what they’re looking for.
There are a number of home features and characteristics that buyers consider “must haves” before buying a home, therefore it’s important to start with these when making a checklist. For example, home-buyers may require a certain number of bedrooms or bathrooms, prefer to own a large piece of land or refuse to live in a certain neighborhood. These non-negotiable features should be communicated to their real estate agent to ensure that they are fulfilled before individuals spend time visiting home staging events.
In some cases, buyers may want to own a home that features double bathroom sinks or borders two school districts. If these factors are important to buyers, but will not necessarily prompt them to turn away from a home sale, they should also be on the list. Real estate agents will work to meet all of a buyer’s guidelines, so buyers shouldn’t leave out the little amenities that may make a house feel more like a home.
You know what they say… “Location, Location, Location.” Choosing the right neighborhood features is almost as important as choosing the right home features. Neighbors, school districts, crime rates, amenities, costs and activities will be a part of a homebuyer’s life for years, so it’s crucial to take these factors into consideration as well when drawing out a list of wants.
Lastly, buyers shouldn’t get discouraged if it takes some time to find the right home. Finding a house that has all the necessary features is worth the wait, and any additional quirks or home features can be altered to meet a buyer’s needs.
Image via flickr use Chris Potter
“Imagine coming home from a long day of work. In the car, you speak into your smartphone, giving commands to start the vacuum cleaner, preheat the oven and run the dishwasher.
After unlocking the front door with your iPhone, the lights automatically turn on as you walk into a clean living room, with the kitchen preparing itself for dinner.” Home smart home may become a reality sooner than you think!