The 5 Do’s And Don’ts When Buying A House

Do’s & Don’ts

Do You Know What To Do And Not Do When Buying A House?

A lot of people have a tendency to think that buying a house is as simple as buying a car —you go to a car dealership, find a car, get a loan and close the same day or in less than a week. That’s far from reality these days when buying a house. Lenders go through extreme measures just to make sure they are lending to the right person. They want to be certain borrowers qualify and can actually afford the monthly payment.

To ensure you qualify for a mortgage loan, do the following first and avoid falling into a financial trap. Here are the 5 Do’s and Don’ts when buying a house:

Do’s:

1. Have a solid work history – typically two years of work history for wage earning or self-employment is good enough to qualify.
2. Save for a down payment – most programs require at least 3% down nowadays. However, there are special programs that may just require 1% down or can be 100% financed, depending on the lender.
3. Build good credit – pay your debts on time and avoid too many liabilities. The more liabilities you have on your credit report, the less buying power you have.
4. File your taxes on time – nowadays lenders need your tax transcripts so failing to do your personal taxes may slow down the process.
5. Be diligent with the conditions and patient with the process – buying a house is a long process and can be nerve wrecking at times. It can take anywhere from 30-45 days to close a loan depending on the difficulty of it. Work closely with your loan officer and processor to get all the conditions in on time and simply wait till everything is clear to close. Working with the right professional can make the experience less daunting.

Don’ts:

1. Avoid opening new credit accounts during the loan process, even as a co-signer – this will not only lower your credit score, but it will increase your liabilities. The DTI would have to be re-calculated so lenders can be assured that all guidelines are still being met. Mistakes like these could lower your buying power and practically kill the deal if you’re over the DTI limits.
2. Don’t change jobs during the loan process – most lenders requires at least 1 month work history at your current job before accepting your new income. If your new income is less than before then the numbers would need to be re-calculated. Furthermore, if the DTI is all the sudden over the limit you may not qualify. So to be safe, make sure you’re not planning on switching jobs during the loan process to avoid a loan denial.
3. Don’t fuss about lower interest rate – the market is constantly changing, it goes up and down on a daily basis. Dwelling too much on interest rate will slow down the process and prevent you from buying the home of your dreams. Focus instead on a lower and affordable monthly payment that you’re comfortable with. Give your loan officer a range so they know what your expectations are and if it’s possible to get there.
4. Avoid large cash deposits that can’t be paper trail – some borrowers have a tendency to hold on to cash on hand instead of depositing into their bank account. Lenders usually requires the most recent 2 months of bank statements. If there are large deposits that can’t be traced back to where it came from then those funds may not be used. To avoid this scenario, it’s always best to deposit any personal funds you have on hand into a savings account 2 months prior to buying a house.
5. Don’t hold up the process – lenders requires a lot of paperwork, their goal is to verify everything related to your financial situation. For the loan officer and loan processor to move forward they will need to collect more documentation from you. When the time comes just be available to provide any additional paperwork they require. On a purchase transaction, there are many deadlines that needs to be met and it’s important to move things forward to avoid any delays or potential loss. In addition, if the interest rate is locked you wouldn’t want to have to pay extra to get an extension on the lock. Be aware of the loan status and make sure to follow the loan officer’s instructions. The sooner you can get a clear to close the better.

Conclusion:

The loan process takes time and everyone is working together to meet deadlines and get a clear to close on the loan. Avoid making unnecessary mistakes during the process and stay in close contact with your loan officer if you have questions. Keeping these simple tips in mind will help facilitate the loan process and make your buying experience a pleasant one.

Happy House Hunting!