Buying a home for the first time is an exciting and intimidating experience. There are a lot of ways you can shoot yourself in the foot when buying a home and they may not always be clear. So, even if you passed the pre-approval stage, secured a loan, and made an offer, there are things you need to be careful about until the deal is fully closed.
So we put together the following list of some common mistakes that people make when buying a home and how you can avoid them.
1. Don’t miss loan payments
Yea, we know it sounds like common sense but we are referring to all your loans, not just a home loan. Make sure to keep paying your credit cards or car loans as the lender will look at your credit one final time before approving the mortgage. Lenders can remove a mortgage commitment and they will if they think it’s better for them.
2. Try not to change jobs
You definitely should try not to switch jobs during the process of buying a house. Lenders take a close look at your employment history and a recent change in your job could be perceived as a risk factor for making your payments. So keep your job move pending until the deal is fully closed.
3. Don’t shift any money around
Lenders look at your current financial situation to determine loan approvals. So you want to keep the financial profile that lets you get the loan in the first place. If lenders see you moving funds around, they may consider it a sign of financial instability. They may ask for an explanation of any movement too.
4. Don’t buy a car at the same time
Buying a car while looking for a home is a common mistake. Your pre-approval of the loan was based on your current financial situation, and getting a car usually incurs a separate loan that lenders will take into account when finalizing the deal. Adding the debt of buying a car could cause your lender to reconsider the deal.
5. Don’t make any large deposits (especially cash)
Typical, lenders refer to the two-month period as “seasoning” which they use as a demonstration of stability. If you have a lot of deposit activity in those two months, they might think that the activity is fishy. Lenders prefer that you have the down payment money in your account for at least two months.
6. Don’t get any credit inquiries
When you apply for a credit card or some other loan product, most companies will pull your credit score. This kind of “hard inquiry” can have an effect on your credit score. If lenders see a lot of hard inquiries on your account, they might assume you are trying to take on more debt, even if you are not.
7. Save for closing costs
A lot of people get so excited about getting their loan approved and putting a down payment on the house, they forget about closing costs. The last thing you want is to be unable to manage closing costs when you are so close to owning a home.
8. Do not co-sign any other loans
If you are co-signed to a loan, then you have a financial obligation to pick up the tab, even if you are not the primary beneficiary of the loan. Home lenders tend to look negatively on co-signed loans as that indicates to them you have more debt.