What Not To Do Before Purchasing A Home
Finding the right home to purchase is the most exciting part of a real estate purchase, but most people do not realize that some of the most critical aspects of the entire process are the things you don’t do. If you want to conclude the deal successfully, it’s important to know what not to do before purchasing a home.
Avoid making any large purchases
For at least three to six months prior to your planned home purchase, avoid making any large purchases of any kind. This may sound extreme, but potential lenders are going to look at your spending habits and especially at the amount of debt you have already incurred; the more debt you owe, the less they will be willing to lend you for your home purchase.
A really good example is buying a car. You may find a great deal on exactly the model you want, and of course the dealer is going to be happy to help you finance it even if it means an extended loan term, a higher interest rate, or the like. The problem arises when you go to a potential mortgage lender looking for a home loan and they take a look at your income, your cash available, and your debt. Suddenly that car payment looms quite large because it increases your debt to income ratio and reduces the amount of mortgage loan you’re qualified to get.
The same advice holds true for all kinds of other major purchases, such as:
• Furniture
• Electronics
• Appliances
• Jewellery
• Vacations
Always put your home buying plans first, and avoid making large purchases that could derail those plans unexpectedly.
Keep your money safe and unmoved
Potential mortgage lenders will look at all aspects of your finances, and we do mean all aspects. This includes detailed examination of your entire financial situation, especially your source of funding for the down payment and the closing costs. Your checking accounts, savings accounts, certificates of deposit, mutual funds, retirement accounts, and the like are all of interest to your lender and you will be asked to provide at least two to three months worth of statements showing the amounts of money and where they are located.
If you have changed banks or moved money around between or among accounts during the previous two to three months, this can seriously complicate the process of getting the lender to approve your home loan. Why? It might seem tedious and even frustrating, but the lender has a responsibility to fully understand your finances and especially your sources of liquid assets. Anytime you move money around, such as between accounts, from one bank to another, or the like, the lender is going to want detailed receipts, cancelled checks, and everything else necessary to create an accurate paper trail of how, when, and where your money has moved around.
So if you want to make things easier on yourself (and on your loan officer), don’t move money around unnecessarily in the months prior to applying for a home loan.
About the Author:
I was born and raised in Central Toronto, spending my whole life in the neighborhoods that I now work, and in the Toronto Real Estate industry. I understand all the nuances of Toronto’s various communities & what Toronto real estate agents have to deal with.
I have dedicated my education to negotiating, marketing, business development and staying ahead of the curve with technology. I have attended international conferences, understand major agencies like Johnston and Daniel, all of which has helped me learn how I can provide more efficient, effective and thorough service.
