You are ready to buy a home, or are you? Most likely you will need a mortgage to purchase your next home and you will need to qualify for that mortgage. There are 3 things you should not do before you buy a home.
These three things will make it eaiser for you to qualify for that mortgage and get the best interest rate you can.
1. Don’t Open any New Lines of Credit
When you apply for a mortgage, the mortgage broker will pull your credit report. They are going to look through it in detail to see how you have handled credit in the past. They will also look at your credit report to see your recent activity. If you have opened up new lines of credit, they may view this as a negative since you are looking for sources of credit. They may see this as your inability to pay for your current expenses and you are using credit to pay your expense.
When you are looking to buy a house, hold off opening up any new lines of credit, regardless of the type, until after you own your home.
2. No Major Purchases of Any Kind
If you have a large purchase in the last couple of months, this could hinder your ability to qualify for a mortgage. If they see that you just purchased a car or a boat, the mortgage broker knows that you have a new monthly payment and you don’t have a history of showing that you can make the payments on that new purchase.
It will also impact your debt-to-income ratio, a very important ratio that determines the amount of the mortgage you can qualify for.
3. Don’t Move around Money
The lenders like to see that you have had the money in your bank account for at least a couple of months. If they see new deposits of a large chunk of cash into your bank account, they will ask you where it came from. If it came from someone else, they will want an explanation from you. If a family member is going to give you the down payment for your new home, that’s OK, the lender just wants to know where it came from. Lenders view money that you receive as income different from money you receive as a gift. Don’t try to hide the source of the money, if they don’t trust you they won’t make you the loan. Just let them know where the money came from and show them the paper trail if they ask for it.
The best thing you can do is be consistent in the months leading up to the purchase of your home. Don’t make any new purchases, open any new lines of credit, or move money around just before buying your home. You want to make sure you qualify for the mortgage first since this is the biggest loan you will be asking for.
After you own the home, then you can go out and buy the new car.
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Article Source: 3 Things NOT to do before you buy a home
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