Getting the financing for your home may seem like an easy task if you have are really good loan officer, but many people don’t realize that there are several road blocks that could shut down the whole process if you are not careful. These “commandments” are some things that everyone should abide by when going through the home buying process. Failure to obey any one of these could destroy your loan and make it so you no longer qualify for the home you want to buy.
- Thou shalt not change jobs, become self- employed, or quit your job.
Your qualification for your home loan is based off of your current income and being able to verify that income. These numbers are always double checked at the end of the loan process just before you close. If there is some sort of drastic change to your job or source of income throughout the loan process, it could cause you to be ineligible for the original loan amount.
- Thou shalt not buy a vehicle.
Another important part of the qualification is your debt to income ratio. This compares your current monthly debt expenses with your current monthly income. If you purchase a new vehicle while going through the loan process, it will greatly increase your debt ratio, which could destroy your eligibility.
- Thou shalt not use credit cards excessively or let current accounts fall behind.
This is a big “no no” for two reasons. First, greatly increasing your credit card debt will increase your debt ratio, which will result in the same consequences mentioned above. Second, if you let your accounts fall behind, this could negatively affect your credit scores, which will, at the very least, cause your interest rate to go up, and at the worst, make it so you no longer qualify for the loan.
- Thou shalt not spend money you have set aside for closing.
The reason for this commandment is obvious: if you don’t have the money to pay your closing costs or provide the down payment you promised, you can’t get the loan!
- Thou shalt not omit debts or liabilities from your loan application.
Do NOT try to hide your debts by not including them on your application. Mortgage lenders are required by law to run a credit check on every single loan. If you are hiding any debts, they will show up on your credit report, they will be included in your debt to income ratio, and they will affect your ability to qualify for a loan. It is much better to be upfront and honest from the beginning so that the loan officer can understand your situation and get you the best possible loan amount.
- Thou shalt not buy furniture.
It is best to wait until after you have purchased the home to buy any new furniture. This will ensure that you don’t take on any furniture debt while going through the loan process. It will also give you a better idea of how much you can spend on furniture because you will be able to account for your new monthly housing expenses.
- Thou shalt not originate any inquiries on your credit.
If you are having your credit pulled for many different purposes during the loan process, it could negatively affect your credit scores.
- Thou shalt not make any large deposits without checking with your loan officer.
The reason for this commandment is that all money coming and going in the transaction has to be documented. The lender needs to verify all funds and accounts that will be used in the transaction. If there is a large deposit made during the loan process, it will have to be verified, and could delay closing.
- Thou shalt not change bank accounts.
This commandment is important for the same reason as commandment 8. If you change bank accounts in the middle of the process, everything will have to be re-verified, which can take some time. You don’t want to be stuck waiting to move into your house just because you wanted to change banks.
- Thou shalt not co-sign on a loan for anyone else.
Some people don’t realize that when you co-sign on a loan, you are accepting partial responsibility for that debt even though you may not be the one making the payments. This type of debt will greatly increase your debt ratio.
Now you know the Ten Commandments for buying a home. If you strictly abide by these laws, your home buying experience should be smooth and you won’t encounter any surprises. If you disobey, you may find yourself on the outside of your dream home looking in. If you have any questions about any of these guidelines, or are looking to get financing for a home loan, please don’t hesitate to contact one of our qualified mortgage loan officers today!