Congrats, you’ve decided to buy a house!
Did you know that home buyers often find that the financial aspect of the process is the most complicated?
You don’t have anything to worry about, though. In this article, I’ll tell you what financial steps you should and should not take before and while buying a new house and using a mortgage broker to help you through the process.
10 Things Not to Do When Getting Ready to Buy a Home
Let me walk you through a couple of things you should avoid before buying a house. Trust me, they’ll make getting your dream home so much easier, especially for first time homebuyers.
1. Don’t Buy a Big-Ticket Item
Buying big-ticket items such as furniture or a car will increase your debt-to-income ratio. It will concern banks and lenders that you are making other larger purchases at the same time looking to buy a house. It could affect how they see you and the terms they offer.
2. Don’t Quit or Switch Your Job
If your stability isn’t great, lenders will be more likely to deny your loan application. When you promise someone you’ll pay them back, you need to be financially stable.
3. Don’t Change your Banking Institution
You shouldn’t change banks, even if another bank gives you an awesome deal. Why? Changing your bank just before you buy a house shows instability. That’s a big no-no when getting a home loan pre-approval. To make sure you’re earning what you said you were, lenders will check your bank account activity. So stay put until the loan process is complete.
4. Don’t Open or Close any Lines of Credit
Extending or closing credit lines doesn’t sit well with lenders because:
- Paying off too much debt might leave you with no liquidity
- Taking out too much debt that you will not be able to repay
5. Don’t Pay Bills Late
Lenders feel that if you’re late with one lender, you’ll be late with others too. Showing you pay your bills on-time shows lenders that you’re responsible. It is a big part of getting a loan.
6. Don’t Lie on your Loan Application
Sounds like a no-brainer, right? You’d be surprised at the number of people who hide liabilities and debts in their applications. You should not request a loan based on false information. Always be honest and forthright in the loan application process.
7. Don’t Ignore Questions from your Lender or Broker
Most of the questions brokers or lenders ask are important for the purpose of getting you the right loan. A lot of questions ask about your paying capacity, requirements, and history. If you don’t answer their questions, they’ll be suspicious, which could hurt your chances of getting approved for a loan.
8. Don’t Let Someone Run a Credit Check on You
Before you apply for a loan, you should avoid credit inquiries. The more credit checks you get on you, the more the lenders will think that you’ve been trying to take on more debt. It’s important to avoid any hits on your credit leading up to applying for a loan.
9. Don’t Make Large Deposits to Your Accounts Outside of Your Paycheck
You should avoid looking dubious to your lenders if you are making changes to your payment patterns. Try to avoid making large payments on loans for at least two months prior to applying for a loan. Large deposits can raise risk questions about the whereabouts and streams of your income.
10. Don’t Cosign a Loan with Anyone
The more loans you have, the more your debt-to-loan ratio increases and could negatively affect your loan application. Yes- even if you’re not the one making the payments.
Now that we have the DON’Ts out of the way, I want to share some of the things you should DO as you look at getting into the market of buying a home.
Here are Babak’s top 10 things to do when applying for a mortgage
Let me walk you through the things you should do when considering buying a new home. Remember, I will take care of almost everything for you (numbers 1-4 and numbers 8 and 10). Where I can’t, I’ll recommend some trusted people I work with (realtors and partners) who will make your home buying journey seamless!
Finding the right mortgage lender is not easy, but I can guide you through the process. Do these 10 things and you’ll be uber prepared for home buying success.
1: Check your credit score
The first thing to do when you are going to purchase a home is to check your credit score. If your credit score is not high enough, then there are some options available for improving it. You can get a copy of your credit report from the three major credit bureaus and make sure all the information on it is correct.
It’s important to know what you owe, how many credit cards you have, how many credit accounts you have, and anything else you owe before you make an offer. Babak can help you with this.
2: Figure out how much house you can afford
This is a hard one for many people. It really does depend on the individual’s income, expenses, and lifestyle. What I recommend is working on your personal budget to figure out how much you are spending now and how it might change when you buy a house.
It’s not only about how much of a mortgage payment you can afford. Based on your income and expenses, we’ll figure out what your mortgage eligibility is. I got you!
3: Find a good real estate agent
Finding a good real estate agent is important. Start looking for your agent early in the process. Your agent should be with you through the whole home buying process, find homes that match your criteria, negotiate your offer, explain the mortgage process, and help you close. If you need help finding a good agent, Babak can refer you to some of the best in the area.
4: Get pre-approved for a loan and home purchase
The next step in the process is to get pre-approved for a loan. You can compare rates from multiple lenders instead of just one. You may also find it more convenient than applying for a loan after being denied from your bank. I will help you find and get approved for the perfect loan for you. Being pre-approved gives you the peace of mind and the negotiating power you need in today’s real estate market. To qualify for a mortgage, you or your partner must earn at least three times the monthly cost of the home.
5: Start the home search
OK, now it’s time to start looking for your dream home (unless you already found it!). Getting prequalified for a mortgage lets the seller know you’re serious about purchasing their property and have the means of doing so.
6: Make an offer on your dream home
Once you’ve found a home that is perfect for you, it’s time to make an offer. It’s important to make sure the offer is realistic and you’ve taken all the maintenance costs into account. Some sellers want a “contingency” on your offer so they know that the house will sell no matter what, so be prepared to make the best offer you can.
7: Arrange a home inspection with your realtor
If you’re buying a home, it’s important to schedule an inspection. Before you buy a property, you can make sure it’s structurally sound and the systems work. Some people are making an inspection non-conditional in their offers to sweeten the offer. I don’t suggest this, but discuss it with your real estate agent.
8: Secure your financing – Babak’s got this
Securing your financing is the next step in preparing to buy a home. I will help get everything in order to secure the financing. When it comes to closing costs, I will do my best to reduce those costs for you.
9: Purchase a homeowners insurance policy
When buying a home, it is vital that you also purchase a homeowner’s insurance policy. If your house gets damaged, this insurance will cover the repairs or replacements. Not only do you want peace of mind that if something happens you are covered, but the lender wants to be sure its financial investment in your home is protected if it’s damaged or destroyed by a fire or other certain risks. In addition to home insurance, other types of insurance may be required by mortgage companies.
10: Close the deal and move in
Babak will get you closed! Closing day is a great day. Make sure and take a picture in front of your new home and use the hashtag #closingsmile and tag @bsquaredfundinghomeloans on Instagram! Now all you have to do is get ready to move in. Congratulations! You’re a homeowner.
Summing It Up
Buying a house is one of the biggest financial commitments you’ll ever make. Your dream house is within reach if you take the right decisions and take the right steps. Get in touch with Babak “The Mortgage Guy” to get your #closingsmile .
