Just because you're buying a home doesn't mean your life has to be put on hold...or does it? You never know what affect today's actions will have on your mortgage application in three or even six months. Even something as simple as transferring money from your savings to your checking account can create a hassle in the mortgage process. So here are some suggestions of things you should avoid before buying a home:
1) Purchasing a Car or Truck
For whatever reason, many people are inclined to purchase a car and buy a home at the same time. Overall there's nothing wrong with that. However, purchasing the car before buying a home will effect what the mortgage lender determines you can afford as it can greatly raise your debt-to-income ratio. Lease payments that seem quite reasonable can put a major dent in your take home pay, before you sign on the dotted line get some advise on the real cost.
2) Moving Money Between Accounts
When a lender is determining your eligibility for a loan, they will request statements from all of your accounts that contain liquid assets. When you move money around between these amounts, especially if they are large amounts, you will have withdrawals in some and deposits in others. The lender will request the documentation for these. So unless you want to keep up with all this paperwork, it's much easier to leave the money where it is until after you have closed on the home. With the RICO laws that all banks must adhere to, they will require 30 days history on the funds you are to use for a down payment. Be sure that you can prove where the funds came from
3) Changing Banks and closing accounts
This can easily be coupled with moving money between accounts. It just creates additional paperwork for you and the lender. So to make it easier on both yourself and the lender, stay with your current bank until the mortgage is complete. Many of us in Canada use multiple banks and credit unions for different purposes, take note of where all the funds are coming from.
4) Becoming Self-Employed or Changing Part-time Jobs
In most cases, lenders want to see at least two years of self-employment before they will approve you for a loan. So if you can, wait until after buying a home to become self-employed. For part-time workers, changing jobs creates unpredictability in the number of hours you will work so the lender cannot determine your gross income to qualify you for a loan.
5) Applying For a Credit Card or Store Credit
Even though the inquiry won't hurt your credit too badly if you already have a good credit score, the additional credit card will cause the lender to question your financial stability for buying a home. This is not the time to be taking advantage of the 20,000 'free' airmiles....
6) Making a Large Purchase
Of course you are going to need furniture when buying a home. However, resist the urge to purchase that new sofa set until after you have obtained the mortgage. Big-ticket items purchased before buying a home can cause the lender to take a second look at your financial situation. If you would like, we can always set up a unsecured or secured line of credit after your loan has been final approved.