Buying a home can be a lengthy process. So, it’s understandable that once you’ve provided all the proper documentation to your lender, you feel like you can relax a bit an enjoy the more fun parts of buying a house.
But, if you’ve got a big purchase in mind–maybe some new furniture and electronics–think twice. It’s important that once you’ve completed the application and the mortgage process is under way, you keep your finances as similar as possible, all the way up till closing. While you’re waiting for that big day to arrive, follow this advice to avoid hitting any roadblocks along the way:
1. This is not the time to buy new furniture, a boat, a vehicle or any other purchase that will add to your long-term debt. Taking on new financing is going to affect your all-important debt-to-income ratio. Don’t take on additional long-term debt, such as buying a car or furniture for your new home. Additional financing will increase your debt-to-income ratio.
2. Keep your employment stable. This isn’t the time to switch jobs or quit your job. It’s also not the time to say goodbye to your 9 to 5 and become self-employed if you were salaried when you made the application.
3. Hold off on co-signing that loan. Yes, your kid brother could really use your help co-signing his vehicle loan, but this is not the time to be charitable. Co-signing someone else’s loan, even if they have been financially responsible, is just another way you are taking on new debt. Don’t do it.
4. Don’t change banks or credit unions. You’ve already submitted your banking information and provided any financial documentation requested. No matter what that other bank is offering you to move your accounts, this is not the time. It’s best to show a stable financial history.
5. Curb your credit card use. Avoid any shopping sprees fueled by plastic. Even if someone’s birthday is coming up or it’s time to do your holiday shopping, don’t wreck your credit card balances over it. The only thing to do with your credit card accounts is to continue paying them down if you’re carrying a balance.
6. Be mindful of payment due dates. Speaking of those credit cards, don’t get so caught up in the home-buying process that you miss a payment or make it late. This is the time to be especially diligent about making your payments on time. If you are worried about being distracted, set up your bank account to make the payments for you.
7. Don’t raise flags with large deposits into your accounts. Ask a lender if you can borrow your down payment and you’ll almost certainly be told no. But, at some point, money you’ve sourced in a way other than saving it up becomes yours and not “that money you borrowed.” At that point, the money is said to be “seasoned.” Money for your down payment should be in your account for a minimum of two months prior to your application. Don’t take out a new loan in the middle of the process.
8. Hands off your savings or investment accounts. If you can’t use your credit card or take out a loan for a major purchase, you may be eyeing that fat savings account or perhaps even your investment account. Avoid temptation and don’t tap into these sources while your loan is in process.
9. Don’t apply for new lines of credit, including new credit cards. You’ve worked hard to build a great credit score. You can expect a flurry of credit card offers coming your way. Avoid temptation to take on more debt and shred them. Now is also not the time to shop around for a new car loan.
10. Don’t take on any other new debt or make any other changes that would alter the financial picture you presented with your mortgage application. This also means that when you make your application, you need to be 100% truthful about everything.
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