What Not To Do When Purchasing a Home With a Loan

When buying a home, there can be unintentional mistakes made that can halt the purchasing process and loan process. These are common mistakes that can be easy to make, but they can cause you to lose out on the purchase of your dream and/or starter home. You’ll have to start the pre-approval process all over again, and may lose out on the house you wanted.

PROTIP: LENDERS LOVE WHEN CLIENTS HAVE FINANCIAL STABILITY!

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Once your offer has been accepted on a home, please do not do any of these things during escrow.

  1. Don’t Miss Bill Payments
    Keeping your bills and loan repayments current is very important — lenders will re-check your credit score before finalizing the loan. Having payments in default is a huge red-flag to a lender. Also, any fees and money that you put towards purchasing this home may not be refunded.
  2. DO NOT BUY THAT NEW CAR
    Please, just wait until the close of escrow. The lender is using information that you provided during pre-approval. If your new car payment was not a part of that, it can really throw a wrench into the funding of the mortgage.
  3. Do not Become “House Poor”
    You may be pre-approved for more than what you’re comfortable spending. Stick to what you’re comfortable paying a month for a loan payment. Don’t over-stretch yourself or your budget.
  4. Debt Consolidation
    This may sound like a good idea, but there can be hidden fees and variable interest rates within consolidation loans. Always read the fine print. Lenders like when clients have stability.
  5. Do Not Change Financial Institutions
    Hate your bank? I’m not a fan of mine either. But, when you are in the loan process, the lender is using information from current accounts that you provided. They want a stable banking history, so if you go to a new bank you will not be able to provide that. Wait until the close of escrow to switch banks.
  6. Do Not Move Money Around
    When you’re in the pre-approval process, lenders want current state of finances and will refer to that current state of finances until the close of escrow. If you move money around multiple accounts, you will have to provide a detailed explanation and accounting records. Save yourself the hassle and wait until escrow closes to move money around.
  7. Avoid New Credit Inquiries
    New Credit Inquiries can actually lower your credit score. It’s exciting purchasing a home and getting to buy furniture, decor, etc for it. But, if you’re already on the border between “Excellent” and “Good,” this can really hurt your chances of securing the loan and/or lower interest rate. This also affects your monthly debts–this can cause the lender to put the brakes on your loan. Wait until after the close of escrow to open new lines of credit or have credit inquiries preformed.
  8. Do not Switch Jobs or Quit your Job!
    The lender is using your Gross Income and stable monthly financial history to determine how much loan you can afford, and if they can count on you to make the mortgage payments. Lenders do call your employer for employment verification. If you switch jobs, that creates a message of instability to the lender. You may have another job lined-up and want to quit your current job to get a few weeks off–but this shows a period of NO INCOME to the lender. This can be a big deal and can cause the lender to not fund the mortgage.
  9. Don’t Overpay when Buying a House (unless you reallyreallyreally want the house and you have the extra funds)
    If you’re a first-time home buyer in a seller’s market, it can be disheartening to end up in a “bidding war.” But, if the home is appraised for less than the agreed offered price, you will be stuck with paying the difference; lenders will not fund beyond the appraised value. If you cannot get the home for the appraised value and do not have extra funds, it is best to move-on. If you stick with the contract, you will have to make up the difference between the agreed sales price and appraisal price.
  10. Do not Spend the Money you are going to use for Closing Costs
    Stay strong! You’re almost to the finish line! You’re almost a homeowner!

Ready to start your San Diego Home Search or have questions about Real Estate? Send me an e-mail by filling out the form below! Happy House Hunting!

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