Are you in the process of buying a new home? Here are 10 tips for future homeowners to follow if you plan to finance the purchase a Home Creations home. Do not consolidate debt A major part to getting approved for a mortgage is determining your debt-to-income ratio. Consolidating your debt might sound appealing, but can potentially create a negative effect to your credit score. Do not change jobs Lenders look at your employment to determine if you will have the ability to repay your loan as well as how much home you can afford. Having no gap in your employment lets lenders know you are capable of paying your mortgage. By changing jobs before getting a loan can make you look less appealing to a lender. Do not shift finances or open a new bank account Lenders will preapprove you for a loan based on the current state of your finances. Moving money around to various accounts becomes a red flag to lenders and will make questions arise about your finances. Avoid making larger purchase such as a car or furniture. Do not add any more debt while you are looking to purchase a home. The loan pre-approval process for your new home is based off of your debt-to-income ratio; adding debt can possibly cause you to not qualify for a home loan. Also avoid making credit charges for large items such as furniture. Charging larger items during this process can change the state of your credit, potentially leading to the loss of your loan approval. Avoid making large deposits Large deposits, that are not normal, are a red flag to lenders. Keep your bank account consistent and avoid making unexpected large deposits into your bank account. Also, do not deposit large amounts of cash because it is harder for a lender to find the source of that cash deposit. Do not spend money that you intend to use towards closing costs. Most potential homeowners are aware of what payments they will be making but most might not factor in closing costs. Closing costs generally run between 2% – 5% of your loan amount. Knowing an estimate of your closing costs can help make the transition of homeownership much easier. Know your credit score Contact a lender to learn your real credit score. A lender pulls information from Equifax, Experian and TransUnion. These numbers are then averaged together to form your credit score. Do not open new credit cards. You might be tempted to open a credit card to purchase items at a discount or to make larger purchases but opening a new credit card during the process of getting pre-approved for a home loan can hurt the pre-approval process. Opening new credit cards could also make your interest rate higher. Do not get married during the process of purchasing a home. The debt of your future spouse can be counted against you when you are looking to qualify for a loan. You can solve this issue by purchasing a new home before you get married. The lender will not look at both credit reports since you are not married yet. Continue making payments on other bills such as a car payment or any other loans you may have. A credit report is pulled again before your mortgage is finalized. Not paying your bills can lead to possibly losing your loan for a house.
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