|As your trusted mortgage advisor, my team and I provide you with more than just a loan. It’s part of our continuing service to offer the following tips that may be of help when you’re looking to purchase a new house or refinance your home loan.
What NOT To Do
As you choose the path that leads to the home of your dreams, you can take either a pleasant Sunday stroll in the park or a gut-wrenching tiptoe through a minefield. Here are the six most-important “don’ts” when you’re considering buying a new house.
1. Don’t go on a spending spree! Draining your savings or running up credit card debt to buy a new living room set, a big-screen TV, or a new car could make a difference in your interest rate and whether you even qualify for a mortgage. Avoid spending money until after the closing is completed, whether by credit or cash. Keep your debt down and as much money in your bank account as possible. Your lender will check bank and credit card account history.
2. Don’t change jobs. Unless it can’t be avoided through such things as drastic location changes, experts say it’s best not to change your employment picture until after closing. A worse move is to change from a salaried position to self-employment. Lending institutions like to see steady employment and generally insist that self-employers show a minimum of two years of successful income.
3. Don’t mess up your credit. Don’t try to improve your credit score without talking to a professional. For example, you may think you’re going to bump your score up a few notches by canceling credit cards. But, canceling the wrong ones for the wrong reasons can seriously damage your credit score. Credit experts say it’s important not to have too few or too many open credit accounts, and the best credit is old credit. Another possible pitfall is to transfer all your credit card balances to one card to get zero balances on the others.
4. Don’t pay off all your bills. Paying credit cards down to below 50 percent of the your credit limit is generally helpful to boosting your score. But, paying off all your debts is only wise if you still have enough cash remaining to make your down payment, closing costs and prepays. In other words, don’t deplete your savings to pay off your credit cards.
5. Don’t think about lying. Lenders want to know how much cash you have to put into the house — truthfully. If you’re borrowing the money for a down payment and have to pay it back, it will have an effect on your ability to meet all your obligations. If it’s a gift and doesn’t have to be paid back, that’s fine. Whatever you do, don’t borrow it from your uncle and tell the mortgage banker it’s yours! The bank may ask you to document how long you’ve had the money or where you got it from. A lie could backfire and ruin the whole deal.
6. Don’t do any spring-cleaning. Don’t throw out bills, bank statements or tax returns. However, it’s a great idea to organize all the important papers that may be requested by a lender. Such documents may include W-2s, 1099 income statements, recent pay stubs and tax returns for the past couple years if you’re self-employed. While you’re at it, round up your prior title insurance policy, any canceled checks, settlement statements, or other forms of proof that you paid collections or disputed accounts.