Buying a home is a major financial decision and along with that decision comes some important financial management choices as well. While everyone’s situation is different and unique to them, there are some do's and dont’s that will help keep any homebuyer on the right track till closing. Let's take a look at what you should and shouldn't do financially when purchasing one of the many homes for sale in Champions Gate.
Don’t Apply for New Credit
Regardless of what the new credit account is for, it can (and likely will) negatively impact your credit score. A lower credit score can determine your interest rate and your eligibility for certain lending programs that could be very beneficial to you. In the worst case scenario you could be denied mortgage approval entirely if your credit score drops too low.
Do Supply Your Lender With What They Need Quickly
The mortgage approval process is full of milestones and documentation that must be provided in order to hit those milestones. When your lender requests a document or specific information from you it is in your best interest to provide those items as soon as possible. This ensures there is maximum time to address any issues that could arise.
Don’t Deposit Cash into Your Bank Accounts Before Speaking with Your Bank or Lender
Lenders need to be able to show the source of your money, and cash can be difficult to track. Large deposits of cash into a bank account can raise red flags for your lending institution and can delay your home purchase if not tracked quickly. The best rule with cash deposits is when in doubt, speak with your lender first before depositing.
Do Keep Tabs On Your Credit Score
Nowadays it's much easier than it used to be to track your personal credit score. Many credit cards offer credit score tracking through their apps, and third party services are readily available if your credit card company doesn't offer such services. Keeping track of your credit score to ensure there are no fraudulent transactions or activity will ensure you are in the best situation when it comes time to finalise your loan.
Don’t Make Any Large Purchases Like a New Car or Furniture for Your New Home
While your beautiful new home may need beautiful new furniture to match, make sure to wait till after you settle on your home to make big purchases on your credit cards. Charging large amounts on your credit cards can lower your credit score and affect your debt-to-income ratio. Even if it's not on your credit card, large loan based purchases like a new car can have a similar effect that should be avoided.
Do Keep Your Current Accounts Open
Many buyers believe having less available credit makes them less risky and more likely to be approved, but this isn't the case. A major component of your score is your length and depth of credit history and your total usage of credit as a percentage of available credit. Closing credit accounts can put your home purchase in jeopardy and will make it more difficult to purchase a home in the future.
Don’t Co-Sign Other Loans for Anyone
While it may not seem like co-signing for someone else's loan should be that important in your purchase of a home, mortgage companies must look at your entire financial situation. Even if you won't be the one making the payments, co-signing on a loan creates an obligation that mortgage companies will look upon negatively. That obligation will affect your debt-to-income ratio and will make it more difficult to get a home loan while the co-signed loan is attached to you.
These do’s and don’t are well established ideas that act as guidelines for anyone buying a home. At the end of the day it's always a good idea to consult with your mortgage professional before making any big changes during your home buying transaction. Keep these tips in mind when purchasing a home and you will be well on your way to a smooth settlement.