4 Common Financial Choices You Shouldn’t Do When Buying a Home
Purchasing a home can be an exciting time in anyone’s life; however it can also add a lot of additional stress. There are many things that need to be taken into account when purchasing a home in order to ensure that you are able to be approved by your bank for a mortgage loan, and put yourself in the best position to secure a home that you would love. Unfortunately, there are some common financial choices that people make, with the best intentions, prior to buying a home, that turn out to be mistakes in the long term. Try to avoid the following common financial mistakes that are often made prior to the purchasing of a home;
Leaving a Stable Job for Better Pay
When purchasing a home, many people attempt to maximize their income in order to be approved for a loan. However, you have to take into consideration the fact that your income is not the only thing that lenders are going to look at, when deciding whether or not to approve you.
Leaving a stable job for one with better pay might seem like a good decision on paper, but can make it very difficult for you to be approved for a loan. Oftentimes lenders would rather see that you have a stable job with a smaller income, rather than to leave your stable job for higher pay. Lenders are more concerned with your ability to pay over the long term, then the amount of money that you make currently.
Changing Banks for a Better Rate
In order to secure lower payment rates, many people look to change banks prior to applying for a mortgage loan, in order to ensure that they are able to get the best rate possible. However, it is better to stay with your current bank, one that you have already established a connection and history with, rather than to jump ship for a bank that will provide you with the lowest overall interest rates on your home mortgage.
Changing Banks at the last minute might seem like a good idea at the time, but can make it more difficult for you to be approved for a loan in the long run. It is best to stick with your current financial institution, rather than running from one to the next.
Charging Items For Your New House to Your Credit Card
One of the factors that many banks look at when evaluating candidates for alone, is their debt to income ratio. There are certain variables that are taken into account when evaluating an individual’s debt to income ratio, and one common mistake that many people make before purchasing a home is making purchases for the home prior to being approved by their lender, and charging these items to their credit card.
Although it might seem like a good idea to prepare for your new home by buying items ahead of time, taking on additional debt prior to applying for a loan can greatly reduce the chances that you are accepted.
Make Large Deposits Into Accounts
Another common mistake that you should attempt to avoid when home shopping, is making large deposits into your bank accounts prior to being approved. Lenders like to see that you have had a large sum of money sitting in your accounts for at least two months, and moving funds from one account to another can be a huge red flag that can slow the process of approval, or keep you from being approved all together. You want to show lenders that you have stability, and moving large amounts of money from one account to another certainly does not convey this message.
Author Bio: Stevie Clapton works for FastCash.org who provide short term loans and financial advise.