Three Things to Avoid When You’re Pre-Qualified

Few life events compare to the excitement of buying your first home. It’s a significant step financially, so make sure you avoid these pitfalls once you’re pre-qualified for your mortgage:

1. Don’t take on any new debt.

When you’re getting ready to move, it’s easy to get excited picking out the new furniture and home theater stuff you’re going to want. But resist the urge to buy now – even if your favorite ‘mega store’ is offering 30 months, no interest!

How come?

Taking on new debt – whether it’s for furniture, a new car, or on a credit card – raises your Debt-to-Income (DTI) ratio. That is one of the biggest factors a mortgage lender considers. Any jump in your DTI could make your interest rate go up or even put your home purchase in jeopardy. Wait until after you close on your home to buy that 4K 90” high-definition TV that will make your brother in-law green with envy!

2. Don’t make any large withdrawals or deposits without documentation.

You most likely have funds stashed away in a savings account for your down payment. That’s great! Lenders like it when that money just sits there doing nothing in advance of your closing date. These are called ‘seasoned funds.’

How come?

Sudden large withdrawals indicate that you might be under financial stress. If you do need to make a withdrawal for a very valid reason, be sure to talk about it with your mortgage banker first. And make sure you document exactly what the money is being used for, too.

3. Don’t change jobs.

If you’re looking to make a career move, put it on hold until after you close on your new home.

How come?

Mortgage lenders want to see that you have a stable and dependable source of income that will allow you to cover your mortgage and other expenses. If you suddenly change jobs, it puts that security at risk.

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Great work! You’re on the final approach!

Once your offer to buy a home is accepted by the seller, you’re on the final approach to closing. Think of it like a pilot landing an airplane. Your whole focus now is to land the plane safely without any surprises. So put your seatback in the upright position and get ready to celebrate upon landing, er… closing!