BlogHomebuyingFinancial IQ June 23 2021

3 Things You Should Never Do If You're Getting Ready to Buy a Home

Pitfalls to avoid when you're thinking about applying for a mortgage.

When you're planning to buy a house, you're full of excitement and future plans—maybe dreaming about new furniture, hosting barbecues, getting a dog, whatever fun and freedom homeownership represents.

But the time before you buy a house is also an important time to plan your finances and keep a close eye on any financial decision-making. Put simply: If a question or decision has a cost attached to it, you need to consider how it will impact your ability to qualify for a loan and afford your dream home.

Spending, borrowing, or lending money, or changing your income in any way just before you buy a home can impact everything from your credit report to the way a lender views you as an applicant.

Here are some of the top mistakes you should never make before you buy a home.

1. Changing your job.

Your employment history tells a story of your stability and your available income—it's important not to change it right now! Mortgage lenders are looking for steady, reliable income at a certain amount that demonstrates you can meet the monthly obligation of a mortgage payment. Lenders look at different requirements depending on the type of loan you receive, but for a conventional home mortgage, a lender will look at 2 years of job history.

For some lenders, seeing consistency in your work is more important than an actual job change; if you are a teacher and shift from one district to another, that move would be less of a concern than going from teacher to dog groomer.

2. Buying a car.

Now is not the time to take on any new debt, especially not a substantial one like a car loan.

Why shouldn't you take on new debt to upgrade your ride? Because lenders look at your DTI, or debt-to-income ratio when determining the amount they can loan you and the amount you can reasonably pay each month toward your mortgage. The lower your DTI, the more confident your lender will be that you'll have enough money each month to pay back your loan. The maximum DTI for a conventional loan is typically 45%; however, different home loan products have different requirements.

3. Unintentionally damaging your credit rating.

It may seem obvious that you want your credit report to be in top shape before applying for a loan, but sometimes buyers don't realize the little things they do that can negatively impact their credit score. Late payments and missed bills will put dings on your report and lower your score. So will applying for any new loan or credit, such as a credit card. When you apply, the lending institution makes a "hard" inquiry to check your credit history, and that can temporarily lower your score.

As exciting as the idea of buying a home may be, make sure you go into the process with the knowledge needed to avoid common mistakes that could impact your loan approval. The mortgage professionals at Lennar Mortgage are here to answer all of your questions.

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