What you need to know before buying a Home

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Many first-time home buyers are surprised to discover just how many ways you can mess up the home financing when buying a home. You may received your pre-approval, found a home you loved and made an offer. But if you want to avoid messing up the transaction, you will need to be extremely careful until the sale has closed.

Many First-time buyers make these mistakes here below.  Those Mortgage mistakes can be easily avoided, if you have dealing with mortgage broker.

Use the following tips to protect yourself and your home purchase. These twenty tips will help you make the best buying decision possible.

Those mistakes are easy when you deal with a bank and have never bought a home before.  Avoid these home buying mistakes, choose a Mortgage broker who will guide you through the process and keep the stress out of your life!

  1. Don’t miss loan payments.

You must keep your payments current on all your loan accounts, including credit cards and car loans at all times. The lender will look at your credit bureau  again just before finalizing your mortgage, and if you have missed any payments before taking possession of your new home, the deal will more likely fall apart.

Many First time home buyers mistakenly believe that once the lender issues their Mortgage commitment, they are safe. This is NOT the case! Lenders have the power to revoke a mortgage commitment and will do so if they see fit. If you miss a mortgage payment it will show up on your credit bureau.

If this happens to you, you would have to start your Mortgage financing all over and  apply at a new bank under a different product.  Needless to say, this can cause a home purchase to be delayed, and in the process, you would end up paying interest for closing the deal late.

  1. Be careful before you consolidate your debt.

Debt consolidation can be tempting when you finally start looking at buying a home. Most consolidation offers make it possible for you to bring all your debt under one umbrella payment, which makes sense for some people.

But you should really consult a Mortgage Broker to find out the best option for you. Your Mortgage broker will tell you how much you can afford for monthly payment on your debt consolidation. A debt Consolidation may interfere with your mortgage qualification if your payments are too high.

  1.  DO NOT change jobs.

It goes without saying that changing jobs is not something you should do in the middle of purchasing a home! One of the things lenders look closely at is your employment history. They want to be sure that you are financially stable and capable of making your mortgage payments.

By changing a job before you move in to your new home, could jeopardize your Mortgage financing,  the lender have to adhere to strict underwriting guidelines. Changing job may cause the lender to disqualify you for the mortgage, or that you won’t have enough income to keep up with the mortgage. The word stability is something lenders love.

Keep your move under wraps until after the closing takes place.

  1. Don’t shift your finances around before getting the loan.

When a lender pre-approves you, it is based on your existing situation. You’ll want to maintain the same financial situation, and job. Sometimes First-time home buyers make the mistake of shifting their money around thinking to better position themselves, but this is a mistake. It complicates where your downpayment is coming from.

You will need to give them a detailed accounting of why you moved your money around. Avoid making this mistake and keep your money in one place before closing.

  1. Don’t start banking at a new institution.

Your bank may have made you angry or upset. Or maybe you saw a great offer from a competing bank that you just can’t pass up. Well, you do need to pass it up, because changing banks before getting your loan can disrupt everything.

Just like the job and the finances, your banking history and status is part of the equation that leads to you getting pre-approved. Change your bank, and you may not get final approval.

  1. Avoid buying a car.

Without a doubt buying a car while also purchasing a home is a common mistake. Doing so is also at the top of the list of what you shouldn’t do before buying a home. Sometimes the feeling of knowing you are finally going to get a home of your own can be so exciting that you start looking at other ways to improve your life – like buying a car.

Unfortunately, purchasing a car can throw a wrench into your home buying plans. Your loan pre-approval was based on the state of your credit and your debt load at the time of pre-approval before you bought a car. Adding the debt that the car purchase will bring may make you unable to get the mortgage for your home.

  1. Don’t buy furniture or household goods on credit.

Another mistake many home buyers make is using credit to start preparing for their new living arrangements. You may want to start buying furniture and appliances to fill up your new home and make it truly yours, but hold back.

Taking on new debt, even for furniture or other household related items, will change the state of your credit and add additional debts that leads to the loss of your mortgage approval.

  1. Avoid making large deposits into your bank account or making cash deposits.

Money that appears suddenly in your bank account makes lenders uneasy. In fact, they prefer for you to have the money that is going to your down payment in the same account for at least three months.

Lenders refer to the three month period and consider it a demonstration of stability and your ability to cover the Mortgage payments. Whenever you make a significant deposit or start doing unusual or unexpected things with your finances before the home purchase, the lender may begin to scrutinize the loan and might back out.

The bank could, in fact, think it’s fishy to see large deposits moving in and out of your account, especially if that hasn’t happened before. Doing as little as possible to make a lender scrutinize your finances.

  1.  Don’t lie on your Mortgage application.

You may have no intention of lying about your finances when you fill out a loan application, but the point needs to be stated regardless. Lying on a loan application is fraud, and if the lender finds out that you mislead in any way, you will almost certainly lose your mortgage.

Even stretching the truth or making an honest mistake that is inaccurate, can cause you significant problems if the truth is discovered. So be very, very careful that all the information you put down is entirely accurate. Falsifying knowledge is a definite no-no when applying for a mortgage.

This a significant home buying mistake that can put you in a horrible spot.

  1. Don’t let anyone make inquiries into your credit.

Any time you apply for a credit card, a loan or even try to sign up for a new service, like a cell phone service, the company you are working with will probably make a credit inquiry. They do this to determine if you are a safe risk, much as the mortgage lender does.

But when the mortgage company sees that inquiries are being made, it may assume you are trying to take out more debt – even if you aren’t. While one or two queries may not be enough to lose your home loan, there is no reason to take unnecessary risks when you are so close to getting your home.

Shopping around for a mortgage and having your credit checked by multiple lenders when buying a home will affect your beacon score.  Once your beacon score falls below 650, it becomes more difficult to find a suitable lender to provide financing.

  1.  Closing costs.

One of the underwriting rule, is to check to make sure the home buyer has sufficient funds for closing cost;  1 1/2 percent of Purchase price. For many home buyers, it is very tempting to use those funds during the period surrounding the home purchase. Money may be tight,  but avoid spending it.

The last thing you want is to be unable to cover closing costs when you are at the point where you almost have your new home. Stay strong and avoid spending it if you can help it.

  1. Don’t overextend yourself.

When buying a home, lots of lenders will gladly give you what they think you can afford on paper. What you qualify on paper, however, doesn’t necessarily mean what you’ll be comfortable living on day to day.

Some buyers make the mistake of really overextending themselves. They end up becoming a slave to their home. If going out to a nice dinner from time to time is something you have been accustomed to be more conservative with your house purchase.

  1.  Co-signing for a family member.

When you co-sign for a loan or mortgage you are obligating yourself financially, therefore this debt must be disclosed on your Mortgage application . It does not matter that you are not the primary person on the mortgage. If the primary borrower on the mortgage defaults, the lender will come looking for you to pay.

Therefore it is important to remove yourself from the mortgage you have co-signed, if possible.   Otherwise you will not be able to qualify for your own home purchase.

No matter how badly you may want to help out a family member, try to postpone co-signing until you have the money for your home purchase.

  1. Don’t spend more than the value of the home.

There are times when  the real estate markets become extremely hot! It is called a “seller’s market.” Most of the cities at some point or another  have experienced these conditions over the last few years. Home Buyers have been put in the position where winning the bidding wars are the norm not the exception in many places.

In fact, when you are in an environment such as this, it is easy to overspend as a buyer. After all, if you have lost out on a few homes, you’re more than likely going to reach to get a house you love.

When involved with multiple offers it is not uncommon for the sale price to be pushed significantly above asking. While the home buyer may be willing to do this, a lender may not. When the home doesn’t appraise the borrower may be stuck putting up more money or risk losing the house. You can’t assume the seller will be cooperative and drop their price. The lender will only provide financing based on the value of the appraisal or the purchase price, whichever is the lowest of the two.  You could be rejected for the mortgage if you can’t make up the difference.

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About Sky Financial

We incorporated The Mortgage Centre-Sky Financial Corp. in August 1992 in Edmonton Alberta. Furthermore we opened offices in Fort McMurray, Cold Lake, Grande Prairie, Red Deer, Stettler, Saskatoon, Moose Jaw and Prince George BC.

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