HomeBuyer University: Buying a Home, Just Got Easier
Course 2: Things Every Home Buyer Should Know
Step 1: Mortgage Approval Factors
Step 2: Understanding Mortgage Payments
Step 3: Renting vs. Buying
Mistakes to Avoid
Are you thinking about refinancing or buying a home within the next several months? If so, you must avoid mistakes that will impact your ability to qualify for a home loan. Below are the common mistakes you need to avoid.
Mortgage lenders review your debt to income ratio. Making major credit card purchases, or obtaining new loans, may drastically change that ratio. Increasing your monthly debts/liabilities can lower the amount you can finance. This is especially critical once you have found a property, and you have started the official application process. Since mortgage lenders may request an updated credit report prior to final loan approval, changes in your credit score or the new debts you’ve acquired can lead to a denial of home financing.
The approval process includes a review of your present and past income to determine your ability to make payments. It also includes a review of your last two years employment history to determine your job stability. Changing employment during the approval process can lead to problems – particularly if the change results in lower pay or the new job is in a different field. A change of employment during the mortgage approval process can also create delays while your new income and employment can be verified.
Cash Transactions in Bank Accounts
Mortgage underwriters generally analyze your bank account statements over the last two months to verify assets – assuming you need to put money down or show reserve assets to qualify. Depositing cash or transferring money into an account will require you to prove those funds are yours or was a gift from an allowable source. Not being able to source those deposits, means you can not use those funds as down payment money or reserves. Relying on funds which cannot be sourced, but you need to use for qualification, may result in a denial for mortgage financing.
Shutting Down Accounts
You may think about paying down debts to help you qualify for a home loan. In some cases it can improve your chances, while other scenarios it will not make a difference at all. Prior to doing this, consult with a mortgage professional to determine if paying down debts will help your situation. Whether you pay off debts or not, keep your accounts open! Closing accounts are a sure way to lower your credit score.