Do’s and Don’ts for being Mortgage Ready
When you decide you’re ready to buy a home, examine your own finances closer than you ever have before – because your mortgage underwriter will be looking at your finances even more closely. It’s the underwriter’s job to evaluate your income, credit score and assets to make sure you’re a solid loan candidate. Because of this, it’s important that nothing you do makes your mortgage company question your ability to pay them back. Here’s a list of things you should avoid doing during the mortgage process.
Don’t Make Big Purchases or Lifestyle Changes
Avoid any major lifestyle changes, if possible. Whether it’s buying a car or finally deciding to quit your job and become an artist, big changes that can put a strain on your bank account are red flags to underwriters.
Even big deposits can be questioned by your underwriter. Your underwriter wants to see a steady, regular flow of income. Most lenders will ask for 20% of your home’s value upfront, in addition to other application and processing fees, which can be really expensive – especially for first-time home buyers. If your family knows you’re house hunting, they might want to help you out but, if you’re accepting any sort of significant cash gifts to help with your down payment (anything exceeding 50% of your monthly income), you’ll have to do a few things to make sure your lender understands it’s a gift – not a personal loan.
Your generous donor will have to write a gift letter to your lender. This should include personal information about the donor, their relationship to you, the property’s address, the total amount of money gifted, the date of the transaction and a statement saying the donor is expecting nothing in return.
Don’t Change Your Credit – At All
Turn that friendly cashier down when they tell you how much you’ll save by opening a charge with them. And, don’t close any cards out, either. Both actions can hurt your credit score, and you want your credit score to be as high as possible when you apply for a home loan.
By opening a new line of credit, you’ll create an inquiry on your credit report, which can lower your credit score. And new payments that come with your new credit card can negatively affect your debt-to-income ratio.
Instead of closing out credit accounts, just pay them off monthly like you typically would. This way you keep your open credit and your credit score stays high.
While some things in life can’t be changed, like illness, job loss and natural disasters, others, like your personal finance habits and lifestyle, can be monitored, and can hurt your chances for mortgage approval if not handled correctly. If you anticipate any big, unavoidable changes during the underwriting process, always make sure to talk them over with your Home Loan Expert.
What you offer on a property depends on a number of factors including its condition, length of time on the market, buyer activity, and the urgency of the seller. While some buyers want to make a low offer just to see if the seller accepts, this often isn’t a smart choice because the seller may be insulted and decide not to negotiate at all.
THE MOVE-IN DATE
If you can be flexible on the possession date, the seller will be more apt to choose your offer over others.
Often, the seller plans on leaving major appliances in the home; however, which items stay or go is often a matter of negotiation. Typically, you will not be present at the offer presentation - your realtor will present it to the listing agent and/or seller. The seller will then do one of the following:
- Accept the offer
- Reject the offer
- Counter the offer with changes
By far the most common is the counter-offer. In these cases, your realtor’s experience and negotiating skills become powerful in representing your best interests.
When a counter-offer is presented, work with your realtor to review each specific area. Keeping your goals in mind, seek to negotiate the best possible price and terms.