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Cardinal Rules for Financing a Home

Posted by Sharon Rosshirt on Monday, October 9th, 2017 at 12:52pm.

Whether you are getting ready to buy your first home or your tenth there are some things that you need to be aware of going into the process.  Qualifying for a loan is based on a paper trail showing your credit score and history, income and assets, debts and proof of employment.  Let’s look at some of the Cardinal Rules that affect those things.

Employment

Do not change jobs, become self-employed, or quit your job.  Having current and past employment is imperative to qualifying for a home loan.

New Debts

Do not buy a car or other big-ticket items like furniture or appliances.  Part of qualifying for a loan depends on your debt to income ratio.  So, taking on a new debt can affect how much you can afford and qualify for.  Additionally, do not create any new inquiries into your credit, this includes applying for new credit cards, new student loans, or any other number of things.

Credit Card Debts

Do not use charge cards excessively or let your accounts fall behind. This can affect your debt to income ratios.  Wait until after you close escrow to buy anything.  It is also important to make sure that your card and bills are paid on time.  Credit card companies can report to the credit bureaus if you are 30 or more days behind.  This can severely and directly affect your credit score, which can, in turn, disqualify you from qualifying for a loan on a home.

Stay Cash Rich

Closing on a home will require cash. Some programs can move you in for no money down, but if your loan officer tells you to save money for a down payment and closing costs, do it.  Lenders verify how much money you have in your accounts and you will need to bring a cashier’s check to closing.

Be Honest

Do not omit debts or liabilities from your loan application.  You may think that you can cover up a less than favorable financial event but it will show up when your credit is checked.  Disclosing all of your debts will make it easier to find out what you can qualify for and allow for you to find a plan on getting it taken care of.

Keep a Paper Trail

You may need to make large deposits or move your money around to get it in the right place.  Make sure that you have a very clear string on all of your money.  This can be a little dicey if you are accepting a gift or liquidating other investments.  The more information you can provide about these transactions the quicker it will move through the loan approval process.

Do Not Co-Sign on a Loan for Anyone

Co-signing for someone helps them buy something, however it shows as a debt against you.  Even though you are not the person paying the bill, it still shows up on your credit as your debt.

And finally, preparing to buy a home is a complicated process and speaking with a knowledgeable lender is an important first step.  As REALTORS®, we know who the dependable professionals are and we’d be happy to help you find a lender that you can trust.

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