10 Do’s and Don’ts When Qualifying for a Mortgage

Every year I have at least one person who loses a home Loan because they buy furniture or get a car right when they are in the process of a home.  There are certain things that you should and should not do when you are qualifying for a loan and buying a home.  Also, you should always prepare and plan in advance when you are buying a home to make sure you have everything in place.  Here are the top 10 Do’s and Don’ts when qualifying for a mortgage.

DO’S WHEN Qualifying for a Mortgage

• Do keep all existing credit accounts open.
• Do maintain your employment at your current job – if you do not like your job – keep it until you buy a home.  The mortgage company will verify employment usually three days before closing.  If you lost your job – you cannot hide it they will find out.
• Do pay all collections, judgements, or tax liens reported within one year – this will stop you immediately if you have any.  When you pay them off – you must provide written documentation.
• Do stay current on existing accounts – Do not be late on your payments because that will stop your qualification for a home loan.  General guidelines is that a lender wants to see a year without any late payments
• Do call me if you have any questions

Dont’s When Qualifying for a Mortgage Home

• Don’t apply for new credit of any kind – Credit card, target card, etc.
• Don’t MAX OUT or overcharge existing credit cards.
• Don’t consolidate your debt to one or two credit cards.
• Don’t make any large purchases – like a car, furniture, etc.  I have had several occasions where people went out and charged furniture to a credit card and could not qualify for a home loan.
• Don’t make any large deposits into any of your accounts – new guidelines for mortgages state any deposit over $300 has to be explained in a brief letter.  Paychecks, alimony etc. do not need to be explained.  It is the $500 you received for selling your bike on Craigslist

What to Do Before Buying

If you are thinking about buying, it is extremely important to make sure you do a few things in advance before you talk to a lender.

• Make sure you monitor and check you credit.  Get a free credit report each year and make sure there is nothing suspicious on it.  If so, get it removed.
• Save for a down payment and save extra for any closing costs that are not covered.  With the downturn in the market, lenders are requiring that you bring a down payment.  Generally it is 3.5-5.0% of the purchase price and there might be some closing costs as well.
• Create a rainy day fund –  You will need a rainy day fund for emergency expenses, like a sudden doctor bill or the air conditioner broke.  For example, in February, my furnace went out and I needed a new one.  Then in March my son had an appendicitis and had to have it removed.  It was not cheap.
• Create a budget – I talk about this all the time.  Create a budget and make sure you know how much you can afford and are comfortable with for a mortgage payment.

Two Questions I Get Asked A Lot

• If a buyer has low credit, they always ask if they bring a larger down payment can they still buy a house.  The only way you can buy a house with low credit is by paying cash.  If you cannot afford that, then no amount of money will work.
• Second question, is the loan process and qualifying for a loan different depending on where you buy?  That would be a yes and no. The process for qualifying is the same but how much is different.  It is only different for FHA and first time homebuyer loans like Georgia Dream. There are maximum loan limits for FHA loans.  If you are buying a homes in Smyrna, in Cobb County, the loan limit for a single family home is $342,700, but in Atkinson County the loan limit is $271,050.  Check the county you want to buy a home in to find loan limit amounts.

If you have any questions or need information about lending or finding a home contact us

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