Friday, November 24, 2006
What You Should Avoid in the Months Before a Home Purchase
Buying a home is a large measure and there are some definite no-nos to avoid so that your home purchasing experience isn't something that brands you desire to leap off the nighest bridge. While many people presume we are talking about the 'shopping around and making an offer' time period no-nos, we are actually referring to respective calendar months prior to your home purchasing experience.
1) First Off: Don't Blow Your Credit with Additional Debt
One of the built-in determinations for any lending establishment is a borrower's interest rate. This rate is decided upon based on your credit score, assets and financials, amount of down payment, as well as numerous other potentiality factors. Any major purchase that you do or disbursal that you incur (car, boat, wedding, electronic equipment, vacations, etc.) tin impact the amount of debt that you are carrying and can adversely impact your loan rate. (Since your loan rate can be with you for many years, it make sense to really concentrate in on how to maintain this as low as possible.)
A Note on Credit Card Debt: If you don't ain a home, most of your debt will be from credit cards. The manner a bank looks at credit card debt is as follows: they take your sum credit bounds on each card and assesss how much debt you are carrying. As long as the debt on each card is less than 50% of the credit limit, a bank makes not look unkindly upon it. However, once your debt transcends 50% of your credit bounds on each card, your credit is adversely affected.
2) Keep Your Cash and Assets Where They Are
Before approving your loan, the lending establishment will reexamine your financials (bank statements -- both checking and savings, 401Ks, retirement accounts, Stocks, Bonds, Mutual Funds, certifications of deposit, etc.) to determine how a borrower is going to come up up with their down payment and/or shutting costs. Most lending establishments necessitate 2 to 3 calendar months of statements for any liquid assets that a borrower holds. This gives the lender a better thought of how much money the borrower have got and sees that they have a good, stable history on these accounts.
One of the reddish flags that a lending establishment looks for is an unusual amount of shuffling of finances between accounts in the calendar months prior to a home purchase. The ground is that a borrower may desire to make the allusion that they have got more than assets than they really make by shuffling finances to generate strong financial statements for each of their accounts. Over a three calendar month period, however, it is very hard to keep the degree of finances for all accounts by milling between accounts.
Many borrowers may be shuffling finances for completely innocuous grounds (a money manager left a fund, an account is closed, etc.). In this case, most banks inquire the borrower to demo the lending establishment the paper trail or sedimentations and backdowns between the accounts to relieve any concerns that they may have. This tin be a frustrating experience -- cancelled checks, sedimentation receipts, and other seemingly inconsequential information tracking tin get rather tedious.
It is a good thought to seek and maintain any milling of finances between accounts to a minimum as it increases the opportunity for errors to be made or may look like you are trying to run from a hard situation.
3) Switch Employment
In most cases, changing occupations will not adversely impact how a lending establishment positions your degree of hazard for a home loan. This is not the lawsuit if, for instance, you go self employed and cannot show a bank that you have got a steady degree of income. As long as your new occupation bids the same degree of income that your former 1 did, most lenders will see this as a wash -- if not an improvement.
The point to all of these recommendations is stability. Change open ups borrowers up to cockamamie errors among your accounts, the allusion of trying to conceal certain financials, etc. This is the last thing that a lending establishment desires to see when they are trying to make up one's mind whether to loan money to a borrower. So, relax, dont make anything drastic or out of the ordinary in the calendar months preceding your home loan. Good fortune and happy house hunting!