If you have decided to test the waters and explore the idea of home ownership, you will have many decisions to make before your journey is complete. Faced with these decisions individuals and couples often get mixed information and end up making the wrong choice. The following is a short list of 5 things you need to do to keep from having to use your seat cushion as a flotation device.
Number 1 – Start with a Plan
One of the worst feelings in the world is being caught off guard and unprepared. Your plan needs to start with a review of your financial well being. Contact your mortgage planner and have them walk you through credit or income issues. Better credit will mean more options for structuring a mortgage plan for you. Nothing will hinder your financial plan faster than paying too much in interest for your home. If you review your credit months ahead of time, you will be able to fix any issues that may exist.
Number 2 – Keep Your Credit Cards Balances Low
Too often I see people get excited about the possibility of buying a home, so they start to furniture shop as well. Nearly every furniture store offers 0% interest for some amazing time frame, and most of the time they’ll succeed in pulling you right in. Now you have this new debt which can lower your score, or better yet, make it impossible to get a loan. Wait until you have the new home and then add the furniture. Ask your mortgage planner before you make any big purchases. No need to “keep up with the Jones’” as it will cost you in the end. For three months leading up to submitting your home loan application through the time it takes to close on the new loan, keep your credit card balances as close to zero as possible. This will increase your credit score and give you the best shot at the lowest rate available.
Number 3 – Do Not Change Banks
There are always advertisements noting the benefits of switching from one bank to another. Though some of these perks surpass what your current bank is offering, do not move anything until you have closed on your new home loan. If you make changes, the paper trail you will have to gather will make you want to hurt someone. Underwriters, by nature, are looking for something you have done wrong, so keeping all accounts as they are will keep them off your back. If you have no choice but to change banks, keep a copy of every withdrawal and deposit. Try not to make cash deposits that are impossible to track, such as cash gifts from friends or family or cash used to purchase something from you. If you’re pulling money out of one account and placing it into another, be sure to deposit the exact amount withdrawn. You will need to provide copies of everything so try not to create extra work for yourself.
Number 4 – Constant Work Habits
A constant or steady work history is exactly what lenders want to see. If you change your employment while house hunting, make sure you are increasing pay or responsibility and try to stay in the same line of work. Making a change that is not consistent with your current line of work or that doesn’t improve your situation with increased responsibility or pay can make things more difficult in the underwriting stage. Being completely open about any job changes to your Mortgage Planner will be extremely helpful. Having this information upfront will enable both of you to be able to come up with a plan that is fitting to present to the underwriter.
Number 5 – Plan Early
Life is much easier if we slow down and plan. Start with your Mortgage Planner instead of a Real Estate Agent. Agents are great for house finding and working the contracts, but you don’t want to fall in love with a home before your financial house is in order. You owe it to yourself to go slow down in the beginning. Your agent will appreciate you for taking the time to “clean house” before getting them involved. This will help you know exactly what you can afford before your eyes stretch your pocket book. Most of your friends will do it the other way around, kicking themselves through the whole process while getting frustrated with their Realtor and Loan Officer and finding that they envy the ease and rapidity of your home purchasing experience.
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