If you are planning to buy real estate within the next year, there are specific mistakes that you must avoid as they may hinder your ability to obtain a home loan. Below are PA 5 costly buyer mistakes.
PA 5 Costly Buyer Mistakes
Large Purchases
Lenders review the percentage of your debt compared to your earnings. Increasing balances either on your credit cards or on new loans may significantly alter that percentage. In general, the higher your debt, the less you can qualify for on a mortgage. This is especially critical once you have identified a property and have begun the mortgage process. Lenders will re-run your credit report shortly before final approval to verify that nothing has changed. If you gained new debts, this can cause issues with the final approval.
Moving Jobs
As part of the underwriting process, mortgage companies review your past and present earnings to assess your ability to pay back the loan. A consistent history in earnings is essential. Shifting employment prior to or during the mortgage process can create issues with qualifying for a mortgage, particularly if the new job is in a separate line of work or leads to less earnings. During the loan process, it may also lead to delays while the new job is verified.
Switching Banks
Loan processors typically evaluate your bank account statements over the past few months. Transferring funds to a different institution can create delays. It is advisable to leave funds in the same place until the closing is done.
Cash Transactions
Most types of mortgages require that you use a certain amount of your own funds for the down payment and/or closing fees. Banks verify this by looking through bank statements. Any cash transactions are closely reviewed. You may be asked to verify the source of those deposits.
Shutting Down Accounts
While preparing to buy a home, you may try to pay off credit cards. Prior to starting this, consider consulting with a mortgage professional on whether this is needed based on your financial situation. If you do pay off bills, do not terminate the accounts as this may affect your credit score. It is best to keep the accounts open with no balance.
More Guidance on PA 5 Costly Buyer Mistakes
The above PA 5 costly buyer mistakes is only a few examples. Contact Pedro Teixeira with FIT Credit at 215-613-8130 or pteixeira.fit@gmail.com for additional information on this and other related topics.