Just because you’ve been pre-approved for a mortgage doesn’t mean you’re in the clear. In fact, if you’re not careful about how you spend your money or manage your finances in the final weeks of your mortgage application, you could find your home purchase derailed completely.
Don’t want your dream home to slip through your fingers? Then avoid these 10 mistakes that can throw your purchase off track instantly:
Making big purchases.
A mortgage lender wants to see that you’re a safe bet – that you handle your finances responsibly and that you can be relied on to make your payment every month. If you make a big purchase right before what’s likely the single biggest investment of your life? That says you’re anything but responsible – and it could send up a red flag to your lender that you’re not the solid bet they thought you were at the outset.
Avoid making any purchases above a few hundred dollars while in the midst of a home purchase. Save buying furniture, booking vacations or making any big-dollar Christmas buys until after closing day has come and gone.
Running up your credit card balances.
When you rack up credit card debt, it impacts your credit score negatively – and it will also throw your debt-to-income ratio out of whack. Your lender is going to pull both these stats right before you close on your home, and if there’s suddenly a big change to either, it could put your home purchase in jeopardy.
Keep a tight leash on your credit cards when you’re buying a home and pay down your balances as much as possible before you even apply. Make sure you’re making payments on time, every time, without fail.
Taking out new loans.
You shouldn’t be taking out any new loans or lines of credit when you’re about to take a $200K loan out on a property. Steer clear of getting a car loan, applying for new credit cards or taking out any student loans during the home buying process. As soon as your closing papers are signed, you’re free to do as you wish – just make sure you have enough consistent income to cover all your monthly payments.
Hard credit inquiries.
Pulling your credit is a soft inquiry – and it’s not going to alert a lender that you’re trying to apply for new loans or open new accounts or lines of credit. Hard inquiries, however, do exactly that. Hard credit inquiries occur when you apply for a car loan, open a credit card or do something similar, and they stay on your credit report for two full years. Too many hard inquiries and it can even lower your credit score – another detriment to getting a mortgage.
In order for a lender to trust that you can pay your mortgage in full and on time, every time, they need to know that you have regular, steady income and employment. If you quit your job, cut your hours or change positions altogether, it could have a serious impact on your home purchase, possibly halting it altogether. If employment changes are on the horizon, your best bet is to wait until you have a least a few paystubs under your belt at the new job before applying for a loan. You also may want to secure a contract from your employer that lays out the details – and agreed-upon income – of your new position. This can set a lender’s mind at ease about your long-term finances.
Overdraft charges and bounced checks.
Your lender is going to want to see a few months of bank statements before finalizing your loan. And overdraft charges and bounced checks? Those send up massive red flags every time. How can a lender expect you to pay your mortgage if you can’t even cover checks you knowingly write? Be very careful with your finances and spending habits in the days leading up to your home purchase, and don’t spend money you don’t have sitting in your bank account. Be frugal where possible, and keep a close eye on your account balances at all times.
Keep Your Home Purchase on Track
Do you want to ensure that your home purchase goes smoothly, easily and without issue? Then contact The Claus Team. Our expert real estate agents can help you stay on track from start to finish. Call us now to get a personalized property listing and to start finding your dream home today.