The idea of finding your dream home is so exciting. I remember when we found ours and we were so happy that we were able to find a house that had every single thing on our list of wants, including size, location and price. We were thrilled; it was divine intervention, in our opinion, since houses in the neighborhood where we are twice as expensive as what we paid for our home, and ours is just as large and just as impressive as any of the other homes (ours was a foreclosure). However, it can be an experience than makes you want to cry if you don’t learn the basic rules of buying a new home.
It’s always amazing to me when someone tells us that they want to buy a new home or build a new home, and then they go out and starting buying all kinds of other things using credit. They finance new cars, recreational vehicles, furniture, put an expensive vacation on their credit cards or use their credit for things that are not entirely necessary. Everyone who has ever bought a house knows that your realtor and your mortgage lender will both tell you one very simple thing; do not finance anything while you are in the home buying process.
Nothing; not one thing. Do not even go out and spend a dime on your credit card if you’re not paying it off right this second. Do not finance a new living room set and have it held until your new house closes. Do not buy anything. Why? Because that preapproval you have means nothing if you go messing up your financial situation before your mortgage is finalized and you close on your home. It’s a bad, bad idea. That new car you just bought might mean you no longer qualify for the mortgage you need to buy that house you’re scheduled to close on in two weeks. I know it sounds silly to some, but you have to understand that there are just a few things you simply cannot do no matter what before you close on a house you plan on obtaining a mortgage to buy.
Do Not Buy A New Car
That credit inquiry, that new interest rate, that new number that’s your debt-to-income ratio might just affect the mortgage you qualify for. Perhaps you go out and finance a new car and think that you’re getting the best of both worlds; a new car and a new house. Chances are good that even with great credit, you might not qualify for that mortgage anymore.
Do Not Change Jobs
There are always a few stipulations here, such as someone who is home shopping in a new city or town due to a move in their job. However, if you’re shopping for a mortgage and you find that you want to move jobs, understand that the particular mortgage you are applying for might be one of the many that require at least 2 years employment at the same location.
Do Not Apply for Any Credit
I don’t care if you’re not spending a dime on a new credit card; don’t even apply for one. You cannot have any new inquiries on your credit report when it comes to applying for a mortgage. If your mortgage lenders sees a bunch of credit inquiries around the time that you are applying for a mortgage, they might begin to question your finances and not want to work with you anymore. I know it doesn’t sound plausible, but you won’t think it sounds so silly when your mortgage application is denied because your lender is concerned with all the credit you’re suddenly opening.
Basically, what we are saying is that you cannot go out and overextend yourself if you want to buy a new home. Ideally, you shouldn’t have any payments you cannot afford to pay for in cash. However, we get that many people finance things like cars, and that’s all right. But when your credit report has cars, boats, recreational vehicles, credit cards, home equity loans, furniture, store credit cards and anything else you can finance on it, you will find that your mortgage application might be so well-received.
Even if you are still approved for a mortgage, it’s a good to know that every single time you add a payment to your credit, you increase your risk of not being approved for a low rate, a good mortgage or the amount you wish to spend on a new home. You might be able to put down more money on a new home to get the one you want, but every single thing you finance makes it more difficult for you to buy that new home. Remember this; live within your means and you shouldn’t have any problem. There is no reason you should have to finance multiple items if you are living within your means.
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