Buying a home is exciting! However, there are a few things to keep in mind when purchasing a home to ensure that your financing will go smoothly. The 918HomeTeam team has helped thousands of buyers from all walks of life so, if you are unsure if something will have a negative affect on your financing just ask! We are here to help our buyers in any way we can and we will walk you through the entire process. Here are some tips to remember when you are preparing to purchase a home:
#1 Changing Jobs
We highly recommend not changing jobs, becoming self employed, or quitting your job while you are applying for a mortgage, this can effect your home loan especially if your income changes. Your loan as you will be seen as a greater lending risk, there are some cases where changing your job will not affect your loan such as changing jobs laterally meaning you are making the same income. Whatever the case may be it is important to notify your lender immediately of any job changes.
#2 Don’t Spend Your Money For Closing
Closing costs can vary on each home purchase and can be negotiated between the buyer and seller, to ensure that your home purchase will go smoothly we encourage buyers to hold onto the money saved for closing even if they are anticipating closing costs to be less then the saved amount. According to the real estate site Zillow, closing costs can be as little as 2 to 5% of your home’s purchase price. You should have at least this much set aside, in addition to your down payment fund, to play it safe.
#3 Do Not Change Bank Accounts
Lenders will check your last two months of income when purchasing a home, the main reason for this is because the lender needs to assure that you have the funds for a down payment and closing costs. If you switch banks or make excessive withdrawals or deposits during this process it can cause a delay since the lender will need to ensure that correct funds can be processed for the loan. We advice to avoid any delays by not changing bank accounts during financing.
#4 Cosigning other loans
Co-signing a loan for someone else can severely impact your chances of getting approved for a mortgage. The reason being is that your DTI (Debt to income) ratio will go up if you co-sign for anyone. Most lenders have a certain percentage your DTI must be at (43% on average) in order to be approved and any new loan will make your DTI rise meaning you might reach the cut off for your home loan approval. Co-signing for a loan can also cause your credit to change which will in turn also affect your financing.
#5 Do Not Purchase A New Vehicle
Much like co-signing, purchasing a vehicle will also affect your debt to income ratio. This is an important factor that lenders tend to look at most when approving your home mortgage. Even increasing your ratio one percent could force you to start over with a new home loan with a significant difference in your mortgage rate. Lenders love to see consistency when you are applying for a home loan so we recommend making any big purchases after your home has closed.