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What to Avoid Before Purchasing a Home & Applying for a Mortgage

Avoid Increasing Your Debt

The amount of debt you're paying off each month in comparison to the amount of money you are bringing in is one major factor that lenders will look at when processing your loan application.

Gifted Deposits/Large Deposits

Everyone deserves some help from their loved ones now and then, however, there are strict rules related to the gifting of down payments from relatives. All deposits in your account must be properly documented to show the lender the source of those funds.

Depleting Your Savings

Many lenders will want to see additional cash reserves, besides the cash you are using to pay your closing costs. So, save, save and SAVE.

Credit Checks

You lender will run a credit check, which indicates whether you are financially responsible both now and in the future when it comes to paying off your loan. It is important to avoid maxing out credit cards or making large purchases, such as purchasing a new appliance or car. You will need significant cash on hand to pay for closing costs and should keep your credit score is as high as possible. This also includes avoiding falling behind on your bills.

Closing a Credit Card Account

It is a common misconception that closing your credit card account will seemingly improve your credit card score. However, this isn't true. Closing your account will actually cause your debit to credit ratio to substantially increase. In addition, closing your accounts infers to the lender that you may not be responsible to handle your mortgage payments in the future.

Co-signing On a Loan

By co-signing a loan, you become partially responsible for that debt. If the borrower can't keep up with payments and defaults, this will also cause your credit score to fall.

Accepting a New Job/Switching Careers

Your lender will want to ensure that you have a stable source of income to pay your mortgage bill each month. Avoid taking on a new career or switching jobs through the mortgage process, as the lender will need to verify your income using paystubs. The field of work must also remain the same to avoid issues with the lender.

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