Did you know that something as seemingly harmless as changing jobs or buying a new car could hurt your chances of buying your dream home? When you’re buying a home in Loveland or Northern Colorado, the last thing you want to do is give your lender a reason to think twice about processing your mortgage loan. As a general rule, you should avoid any significant life changes or big purchases, but there are a few red flags lenders look at that might not occur to you.
Here are seven things you should avoid at all costs during the process of buying a home in Loveland or Northern Colorado:
Don’t Change Jobs
Stability is vital when seeking approval from lenders. Accordingly, the months leading up to your home purchase are not ideal for seeking new employment or pursuing other major endeavors.
While enhancing your career is important financially, you should wait until after signing the final documents to switch jobs or pursue any entrepreneurial interests. Lenders don’t like taking risks. They want to loan money to someone they know can pay it back. Leaving your current job can be a red flag to lenders.
Check with your Lender Before Paying Off Creditors
It seems like a good decision to pay off your previous loans and creditors before making another big purchase. However, certain loans require you to have certain “reserves” in the bank to qualify. In that case, it’s better to keep your money in the bank until your mortgage loan has been approved. Check with your lender before you pay off your credit cards, student loans, or other debt.
Put-Off Making Major Purchases
One of the most fun parts about buying a new home is filling it with new furniture and appliances! I’m sure you’re excited to buy that vintage refrigerator or new grill you’ve had your eye on. But, keep in mind that many major purchases today require credit. While you are acquiring a home loan, you want to limit the number of additional inquiries on your report. You don’t want to have a higher debt-to-income ratio than necessary before you close on a home. Hold off on making those other big purchases until you’re entirely done with the mortgage process to get your loan approved. The new car can wait!
Never Make a Late Payment
Whether or not you plan to buy a home, you should always make payments on time. However, this is especially crucial in the months leading up to your search for a new home. Be careful to pay all car payments, insurance premiums, credit cards, and even parking tickets on time! Any late payment could derail the approval of your mortgage or increase your interest rate when buying a home in Loveland.
Avoid Unusual Bank Deposits
Lenders prefer to see proof that the bulk of your down payment has been in your account for at least two months. This is known as “seasoning.” As previously stated, stability is key. It can look suspicious if money suddenly moves into your account. It could raise red flags or signify you may be depending on family members or others for your down payment. There’s nothing wrong with that, but the sooner you transfer your parents’ wedding gift to your account, the better. In short, the lender wants to know that you can afford and maintain a mortgage.
Don’t Co-Sign Any Loans
Your home buying process is not the time to help out a friend by co-signing a loan. Even if co-signing a small loan for a trusted friend, this will increase your debt-to-income ratio. Additionally, any unforeseen situation or default on the part of the borrower could put your entire loan process in jeopardy.
Don’t Make Any Changes to Your Assets
Don’t forget that you’re already making a major investment by buying a home! These few months are not ideal for making other changes to your assets. Additional investments would deplete the liquid assets you need to make your lenders more comfortable. You’re better off waiting until you move in to invest in the stock market or your brother-in-law’s carpet cleaning business.
Your best chance of securing a mortgage loan is to keep your credit high and your finances as stable as possible. Lenders get uncomfortable if you rock the boat. If you have questions about your specific situation, I’m happy to help. Find my contact information and additional helpful tips for buying a home in Loveland or Northern Colorado on my website.
I'm Lauren Haug! I'm a teacher-turned-real estate agent, and I teach people how to build wealth through real estate in Northern Colorado.
443 E 4th Street #100
Loveland, CO 80537
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