& the Don'ts
Here are a few mortgage do’s and don’ts to keep in mind during your home buying process.
Don’t: Change jobs (without notifying us)– Changing jobs at any point during the home buying process can be risky. Changes to your income can make it more difficult for you to qualify for a loan. A new job may mean a change in pay structure; for example, you may go from a salaried position to something less stable, such as a commission-based job. But even if your pay structure remains the same, your lender may not be able to vouch for your ability to repay a home loan if you cannot show consistent income history.
Do: Have all your required documentation in place – If you do plan on changing jobs, notify your lender ahead of time. They will able to provide you with advice and let you know what documentation will be required. Be prepared to document as much of your previous income as possible, and make sure you can provide pay stubs from your new position.
Don’t: Apply for new credit cards – Your credit score is an important factor that your lender will consider when qualifying you for a mortgage loan. Applying for a credit card can affect your credit score, especially if you frequently open and close credit accounts.
Do: Reduce your debts – Your debt-to-income ratio (DTI) is another factor your lender will consider when qualifying you for a mortgage loan. Your DTI refers to your monthly obligation on long term debts divided by your gross monthly income. The less consumer debt you have to make payments on each month, the less risky you may appear to a lender, and the more likely it is that you may be able to qualify for a home. Pay off and consolidate as much of your consumer debt (credit cards, student loans, auto loans, etc.) as you can prior to applying for a home loan.
Don’t: Make any major purchases – It may be tempting to go out and spend a lot of money on furniture and appliances for your new place, but it’s important to wait until you close on your mortgage loan. You will want to keep your credit cards paid off, or at least to keep your balances low, to avoid negative effects on your credit score. You will also want to avoid deferred payment plans; even if payments aren’t due for months, it can still affect your DTI and your credit score.
Do: Pay your bills on time – For any outstanding debt or bills you may have, make sure you are making your payments on time. Late payments can show up on your credit report and affect your credit score.
Reach out to us with any questions or to go over any specific scenarios that apply to you.
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