For Jody, buying a new home was supposed to be a dream come true. Closing escrow was supposed to be a day filled with excitement, heartwarming, and momentous joy. But when her lender called, Jody could tell by the sound of his voice that something had gone terribly wrong. He asked her about some recent charges, financial changes, and new debt – Then he told her that she was no longer eligible for the home loan that she applied for. Jody had made some crucial mistakes and it cost her the home of her dreams.
Here are 11 mistakes to avoid when buying a home
1. Don’t co-sign on any debt
Remember, your loan is not fully processed until the close of escrow and lenders can always reevaluate the status of your loan until it’s fully funded. So don’t take on any new debt until you have the keys in hand.
2. Don’t transfer money between accounts
A simple bank transfer can seem totally innocent. But during the loan process, banks will be looking at your accounts with a degree of scrutiny. To a bank, your simple transfer could be a red flag. It could mean that you borrowed the funds to inflate your accounts prior to applying for the loan. It could also mean that you’ve taken on new debts and you can no longer afford the loan. Either way, avoid suspicion altogether and keep your funds intact. And if you absolutely have to make a transfer, ask the bank for complete documentation that itemizes all of the transfers.
3. Don’t withdraw or deposit large sums
Again, a simple deposit or withdraw may seem harmless to you, but to a bank, it’s an immediate red flag. So avoid the temptation to deposit or withdraw major funds unless you’re depositing wedding money, salary bonuses, or commissions.
4. Don’t get a new job
An upward-bound career move may seem like an obvious choice to you. But unfortunately, banks don’t always see it that way. For instance, switching from an employed status to a self-employed status could cause a forfeiture of the loan altogether. This is because people who are self-employed must meet different requirements than someone who has an employer. So even if a great opportunity comes along, consult with your lender or Realtor before making any major career moves.
5. Don’t allow your bank accounts to go in the negative
This one may seem like a no-brainer, especially if you have overdraft protection. But sometimes, overdrafts happen as a result of an oversight, as opposed to a lack of funds. So just be sure to keep a watchful eye on all of your accounts, both big and small to avoid any issues.
6. Don’t apply or consolidate credit
Thinking of buying furniture for the house? Don’t. As tempted as you may be to snag that cute little sofa you saw at the store, you have to walk away. Again, your loan is subject to scrutiny until it’s fully funded. So wait until you have the keys in hand before you go furniture shopping.
7. Don’t have a friend or relative pay for anything
Housewarming gifts are always welcomed, I know. But the banks don’t always see them as such. A simple act of kindness can be misinterpreted as fraud in the eyes of a banker if it’s related to the purchase of the home, since gifts are only allowed under certain guidelines. So be sure to pay for the appraisal, earnest money, down payment, etc out of your own pocket.
8. Don’t keep cash in a safe or an overseas account
If you’re planning to use funds as a down payment, the banks need to see the funds in your account in order to prove that the exist. The easiest way is to keep them in a domestic account here in the United States. If you have questions about when or how soon to deposit these funds, ask your lender.
9. Don’t close credit card accounts
If you close a credit card account, it may appear that your debt ratio has gone up, since your buying power will go down. I know this seems a little counter-intuitive, but until your loan is funded, leave inactive credit cards open.
10. Don’t run your credit
Whenever you obtain a credit report, there’s a chance that your credit score may go down. When you’re in the process of applying for a loan, your credit score needs to be as high as possible – a drop of even a few points could mean a change in interest rates or even a denial of the loan altogether. So don’t give anyone access to your personal information if they plan on running your credit until after you obtain the loan.
11. Don’t buy or sell a home in the Inland Empire without calling the Lisa DiNoto Group first.
This is a little facetious, I know. But it’s true. I have a decade of experience when it comes to buying and selling real estate, so I’ve seen it all. I know what financial changes can be made during the home buying process and what to avoid at all costs.
So if you live in the area, and you’re thinking of buying or selling real estate, feel free to call or text me anytime! 909-921-2544.