Five Worse Things You Can Do Before Buying A Home
January 14, 2016 | Posted by: Cam Brown
Currently in Alberta it is a buyer's market but every buyer needs to be aware of things that can cause their deal to collapse or go sideways. So here are the 5 worst things you can do before buying a home:
1. Go Credit-Crazy
Don’t buy a truckload of furniture until after your loan closes. Avoid obtaining credit for any major expense, such as a car, a boat or, yes, a new bedroom set.
Be careful with even minor expenses
New payments are going to affect your monthly debt-to-income ratio and not in a good way. Hard inquiries on your credit report could also lower your credit score. That might hurt your interest rate if you haven’t locked or even knock you out of qualifying range all together
2. Shuffle Dollars and Cents
Lenders will scour your most recent bank statement as part of the pre-approval process. It’s not like they forget about it after that. They’ll take another look at your assets and bank records again during the underwriting process.
You’ll need to explain any unusual deposits or withdrawals. Lenders will require clear documentation and a paper trail if you’re putting gift funds toward a down payment or closing costs. Stuffing a wad of undocumented cash into your account is going to raise some red flags.
3. Get Behind on Bills
Having a late payment hit your credit report before closing can devastate your deal. Payment history comprises about a third of your credit score.
One solitary 30-day late payment can clip 60 to 110 points from your credit score. Maybe not a huge deal if you had an 800 score, right? But certainly is if your score is much lower. But if that 30-day late blemish is a mortgage or rent payment, some lenders will boot your application altogether. Many will require at least 12 consecutive months of on-time payments to qualify for a home loan.
. Co-Sign on a Loan
Co-signing a loan is arguably a bad financial move whenever you make it. But it’s especially risky during the mortgage lending process. It means you’re financially liable for someone else’s debt.
Yes, that someone else might be the most responsible person on the planet. Lenders will still need to factor that new monthly obligation into your overall affordability profile. Adding one more debt to the list could stretch too thin your debt-to-income ratio and assets.
5. Changes in Employment
Probably goes without saying, but losing your job is going to be a big problem. Even job-hopping can present some major hurdles. Lenders crave stable, reliable income that’s likely to continue.
Lenders are likely to slam on the brakes if you take a new job in a different field. Or if you decide to start your own business. Or even if you get a promotion but see some or all of your income shift to a commission basis.
The bottom line: Any change to your employment is significant.
