Thinking of buying a home? Have you read a lot about what to expect in the process? Are you thinking of changing homes or refinancing? If any of the aforementioned are true, there are some things you should know to avoid doing that may cause your loan profile to go from good to not so hot.
For instance, don't go out and buy a big screen television and surround system before you buy the house. I'm sure the house you're considering has the perfect spot for the new gadget in that awesome family room. In fact, that's one reason you are drawn to the property, right? But consider this point: you don't want to elevate your debt right now. Buy your home first. Then see if you can get the "football" package. Most of the time, these purchases show up on a credit card. Then your average monthly payment goes up. I've seen where an extra $50 month payment can make the difference in a loan approval and a loan denial. And be careful about paying cash for that item as well. You may need to show cash reserves to qualify for your loan. Don't confuse reserves with cash to close. The lender sometimes wants to see there will still be some money in your checkbook left over after you write a check for closing costs.
Another no-no? Switching to a new job, especially in a completely different field. Part of the loan decision process involves verifying an income that has a nice, consistent track record to show for it. Of course, if you are doing basically the same thing but making more money, it's not as big a deal. And also, an employment contract can offset the issue. And yes, sometimes these things are unavoidable. Just be smart about it.
Buying a home directly from the seller? A "FSBO" or for sale by owner transaction? Make sure any earnest money you deposit is held by a neutral third party. Perhaps a title attorney or settlement agent. Also, make sure you notate in the contract that everyone has agreed to an earnest money deposit, the amount of the deposit and what happens to the money if the home never closes. With a FSBO, it is not uncommon to find that no realtors are involved at all. Buying a home is the largest purchase most people make, and there's a reason why you may want a realtor to help write your offer. They more than earn their money by protecting their customer from unnecessary risk. A FSBO seller may not know how earnest money "works". Think about it-they usually don't write contracts every day.
Careful about switching money around from account to account too much. Many times bank statements are required as part of the approval process, sometimes more than a month's worth may be needed. Large deposits have to be explained if it's not clear to the reviewer, and paper trails for deposits must be established. Again, just trying to help you avoid headaches.
Finally, get your loan officer the information they ask for when they need it. Did you read that nice pre-qualification letter they sent your realtor? There is a whole list of documents needed to submit your loan for final loan approval. Things have to be reviewed, verified, ordered, arranged, submitted, processed, yadda yadda yadda. Most likely you have a lock deadline to adhere to as well. Failure to cooperate may translate into failure to close on time and more money out of your pocket to extend a lock.
Hopefully, these pointers will help you avoid any trials and tribulations. Now, you can concentrate on the "to do" list!
