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Pelican Real Estate Newsletter
September 2018

Six Things You Shouldn't Do Right Before Buying a Home

While you should always keep tabs on your money and avoid making financial errors to protect your credit score, you must be extra careful during the year leading up to buying a house. As you prepare to apply for a mortgage, your lender will be scrutinizing every financial move you make, and you may be surprised at which actions raise red flags. Here are six things that you shouldn't do before buying a home:

1. Don't Rack Up New Debts
Now is not the time to finance a shiny new car. Your prospective lender wants to see that you are responsible with how you use your available credit, and frugality will impress them the most. If possible, avoid making any major purchases, and pay in cash if you do need to buy something big. In general, you want to keep your debt-to-income ratio as low as possible so that loan officers don't have any reason to believe you won't be able to pay your mortgage.

2. Don't Change Jobs
Even if you have an exciting new offer in the works, it's best not to pull the trigger until you have closed on your new house. Lenders value stability above all else, and they may be spooked if you make a risky move with your employment status. Once your loan is secured, you can feel free to do whatever you want (as long as you're able to keep making your monthly payments), but for the time being, put the job search on the back burner.
3. Don't Change Banks
It may seem like an insignificant detail to you, but your banking history (like your credit or job history) shows prospective lenders that you are generally stable in your life. If your current bank doesn't exist in the city where you're moving to, you can probably get away with switching to a national bank. The bottom line is, unless it's absolutely necessary, it's not in your best interest to move your money around.
4. Don't Make Major Deposits or Withdrawals
You can probably see why withdrawals are a bad idea, as they will make your lender wonder where your money is going, but you may be surprised to learn that major deposits can also raise a red flag. Lenders typically want to see that money has been sitting in your account for a few months before you apply for a mortgage. It might seem frivolous, but banks have to deal with fraud all the time, so your loan officer wants to make sure that your sudden windfall came from a legitimate source.

5. Don't Get Behind on Payments
Late payments can be extremely detrimental to your credit score (often slashing it by as much as 100 points). You should never fall behind on repaying your credit cards or loans, but there is no worse time to do so than right before trying to secure a major financial commitment like a mortgage. Plan ahead and figure out how to manage your debt before it gets out of hand.

6. Don't Cosign Someone's Loan
Hold off on cosigning a loan for a friend or family member until after you've secured your mortgage. It's easy to think that a loan for someone else won't impact your credit—after all, you're not the one repaying the debt—but in reality, this type of loan will show up on your credit report as though you were the one borrowing the large sum. As your debt-to-income ratio skyrockets, you can kiss your chances at qualifying for a home loan goodbye.

Jordan Pehowic, 42 Business Centre Dr. Suite 106, Miramar Beach FL 32550
The material in this publication is provided for your informational purpose only and is not intended to substitute professional advice. If your property is currently listed with a Real Estate Broker, this publication is not intended as a solicitation.

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