So… you’ve decided to buy a home. You’ve been pre-approved by the lender. The home is under contract. You’re almost there! However, many don’t realize that there are some things you should NOT do prior to buying a home. By NOT doing these things, you can help ensure that the process will go much more smoothly.
Do NOT Make Major Purchases
An increase in your debt to income ratio reduces the amount of monthly income available for your mortgage payment. Using cash to purchase high ticket items can also create a problem, since banks consider cash reserves when approving your mortgage. If you’re considering making a major purchase, it would be best to speak with your loan officer before doing so. Some of these high ticket items include:
Don’t Move Money Around and Don’t Change Banks
When a lender reviews your loan package for approval, one of their concerns will be the source of funds for down payment and closing costs. Typically, you will be asked to provide statements for the last two or three months on any of your liquid assets. This includes checking accounts, savings accounts, money market funds, certificates of deposit, stock statements, mutual funds, and even your company 401K and retirement accounts.
If you have been moving money between accounts during that time, there may be large deposits and withdrawals in some of them.
The mortgage underwriter (the person who actually approves your loan) will probably require a complete paper trail of all the withdrawals and deposits. You may be required to produce cancelled checks, deposit receipts, and other seemingly inconsequential data, which could get quite tedious.
Perhaps you become exasperated at your lender, but they are only doing their job correctly. To ensure quality control and eliminate potential fraud, it is a requirement on most loans to completely document the source of all funds. Moving your money around, even if you are consolidating your funds to make it “easier,” could make it more difficult for the lender to properly document.
So leave your money where it is until you talk to a loan officer.
Don’t Change Jobs
Lenders like to see a consistent job history. They aren’t usually as nervous if you change jobs within the same field, but it’s better to stay put until the house is yours.