5 Financial Issues to Avoid When Buying a Home
You’ve worked hard and have been saving money for that down payment. Your goal is to be buying a home soon, but there are 5 financial issues that can complicate your loan approval process. Avoid these five blunders by managing your spending and bills long before you look for a new home. Let’s talk about your plans. And, let’s get you in touch with a local Gainesville lender too. Think of us as YOUR TEAM to be working hard with you to reach your goal of home ownership.
1. Letting Your Credit Score Drop
Your credit score directly impacts your ability to get a home loan, the type of loan you qualify for and the interest rate. If you have borderline credit (a score in the low- to mid-600s) or further credit mishaps could prevent approval. If you have credit challenges such as bankruptcy or late payments, start your house search several months earlier. Re-establish your credit by paying down credit cards to 30 percent or less of the limit and correcting errors on your report. And avoid checking your credit score too much; constantly checking it counts against you. Discussing your financial situation with a local lender before you start the home search is a very smart step in your planning strategy.
2. Languishing in Debt
Consumer debt accounts for 35 percent of your credit score. A late payment’s effect depends on the strength of your score, but the account type and the time since the last late payment also matters. If any of your accounts are in collection, it’s highly advised you pay them off before seeking loan approval.
3. Shopping Sprees
Stay far away from credit-driven shopping sprees. Even paying cash for big-ticket purchases can raise red flags with a lender or the underwriters. They will check your bank statements for unusual deposits and withdrawals and will require you to provide an explanation for them.
4. Changing Jobs
A job change may have an adverse effect on your loan approval because lenders calculate your ability to pay a home loan by averaging your past two years of income. If you can avoid interrupting stable employment during the home-buying process, that’s probably best.
5. Maxing Out Your Purchasing Power
Even though your lender qualifies you for a certain amount, only you know whether you can comfortably afford the payment. Try to stick with the price range that yields your ideal monthly payment. Looking for homes at the top of your budget limits your ability to increase your offer in a multiple-offer situation.
When you’ve nurtured your credit and are ready to start looking for a home, we are here to help. Remember, we are your TEAM! Our goal is to help you every step of the way to find the right home at the right price.