When you are buying a home, you want your financial records and actions to be squeaky clean so you can qualify for the lowest rate available at the time of your application. It is easy to get stressed out when you prepare for applying for a home loan. Following the 10 commandments below will help you stay on the straight and narrow financial path to home loan success.
I. Thou shalt not change jobs, become self-employed, or quit your job
If potential buyers are looking at location, location, location, potential lenders are looking for consistency, consistency, consistency. Someone who changes jobs frequently or has a on-again, off-again work schedule sends up red flags of caution to a loan officer. As Fido can tell you, it’s best to sit, stay. Change jobs after you change your mailing address.
II. Thou shalt not buy a car, truck, or van (or you may be living in it)
Your lender wants to be absolutely sure you will pay them back. Funny how it works that way. One way to show them you are reliable is to hold off on making sizeable purchases.
III. Thou shalt not use credit cards excessively or let current accounts fall behind
Excessive credit card use or failing to pay bills on time puts some serious dings on your credit score by negatively impacting your debt-to-income ratio—something a loan officer looks at closely. Stay the course. Pay monthly bills and do not open any new lines of credit.
VI. Thou shalt not spend money that you have set aside for closing
The old saying, slightly tweaked, works here: You use it, you lose it. Don’t jeopardize your ability to pay closing costs buy spending the money you’ve set aside for that specific purpose. The new, shiny, got-to-have-it-today anything can wait.
V. Thou shalt not omit debts or liabilities from your loan application
Seriously. In today’s age of find-anything-on-the-internet, do you really think people can hide the $30,000 owed in back taxes or unpaid electric bills for the last six months? Even fudging on small debts or liabilities will make your dream home just that…a dream. Tell it all, brother or sista’, tell it all on your loan application.
VI.Thou shalt not buy furniture
Yes, that new sofa and recliner would look fabulous in your new-home-to-be. But remember Commandments II and III? The same principles apply here. Stay the course. The furniture can wait.
VII. Thou shalt not originate any inquiries into your credit
Every time you make an inquiry about your credit, your credit score loses points. If you only have a few accounts or a short credit history, credit inquiries can have a greater impact on your score. If you really, really, really need to see your score, you can request a free copy of your credit report from each of the three major credit reporting agencies – Equifax, Experian, and TransUnion – once each year at annualcreditreport.com. It’s smart to request a credit report from each of the three credit reporting agencies and to review them carefully. Each credit report may contain inconsistent information or inaccuracies. If you spot an error, request a dispute form from the agency within 30 days of receiving your report.
VIII. Thou shalt not make large deposits without checking with your loan officer
If Memaw wants to give you a significant cash gift—anything more than 50% of your monthly income—to help with the down payment make sure the lender understands it’s a gift and not a loan. To do this, the donor—in this case Memaw—will need to write a gift letter to the lender and include her relationship to you, the property’s address, the total amount of money gifted, transaction date, and a statement saying she is expecting nothing in return. If in doubt, ask your loan officer. Memaw would be proud.
XI. Thou shalt not change bank accounts
Hate your bank or credit union? Don’t jump ship just yet. Switching accounts during a home loan process may prevent you from printing off copies of recent statements. Unless you receive and keep paper statements, this can really get you into a jam with your loan officer if you’re asked to prove your income, spending, or identity. Just suck it up and stick with your current financial institution until you walk across the threshold of your new home.
X. Thou shalt not cosign a loan for anyone
Cosigning a loan for anyone at any time is never a good idea. No matter who it is and why the loan is needed, the bottom line is this: if the person you cosign for defaults on the loan, the bank will expect you to fulfill the financial obligation. Such an unanticipated expense can wreak havoc with your ability to pay your home loan. Do you really want to risk foreclosure on your own home if Cousin Eddie defaults on his car loan? There’s just not enough love in the world for that.
The path to buying a home is easier when you call upon a team of experienced, caring professionals. CIS Home Loans, a full-service mortgage bank, has served homeowners since 1991. The personal relationships we form during the loan process are as important to us as the loan itself. It’s why Character, Integrity, and Service make up our name, CIS Home Loans.
Have you followed the Ten Commandments of Buying a Home and are now ready for the next step? Get pre-qualified, or apply for a home loan today. For more information, click here. You can also follow us on Facebook.