Santa Clara Home Buyers

If you plan on buying a home and plan on getting a mortgage be sure to keep reading. 

The home mortgage process is very structured, loaded with rules and guidelines that you must follow in order to be approved. Remember, a bank is going to lend you hundreds of thousands of dollars if not millions, so it’s not too shocking that they want you to follow the path they have defined. Also, they will want to sell that loan, so it must meet the guidelines for the investment portfolio.

For buyers, our local market is always challenging.  In our competitive market, you will be expected to already be pre-approved or have underwriter pre-approval.  In many cases, you may need to waive your financing contingency in order to get the home.

With your deposit and your dream home on the line, you will want to avoid certain financial activities until after you have closed on your home.

Things To AVOID When Buying A Home

Do not change jobs, become self-employed, or quit your job – One of the first things lenders will want to know (and verify) is your work history. They will use this information as the basis for the loan offer you receive, so if you change your job, even for what might be a better one, you very well likely could change your loan status. It’s best to wait until after you close before changing employment. Sometimes if you stay within the same industry it won’t be a big issue, but just let your loan officer know what is going on in your life.

Do not buy a car or make large purchases – The amount of cash you have in the bank plus the monthly payment obligations that you have are big factors in the amount of money a lender is willing to provide you for the purchase of a home. When you purchase a vehicle, you decrease your cash and increase your obligations, and neither is going to do anything positive to your loan approval. Wait until after closing to shop for a vehicle!

Do not use credit cards excessively or let current accounts get behind –As mentioned in the previous point, the monthly obligations that you have are a primary factor in your loan approval. Credit card debt increases those obligations and decreases your desirability as a borrower, so keep your credit card spending to a bare minimum until after your close on your home.

Do not spend money set aside for closing – Your loan approval will be accompanied by a down-payment requirement. You might know that you can pull the money together right before closing, but the lender will want to see that money sitting in your account untouched. DO NOT spend any of your down-payment money or you likely will see your approval reversed.

Do not buy furniture on a credit card – While it is very likely you’ll need some new furniture for your new home, do not commit to buying any until after you close. Remember, all obligations are considered when your loan approval is granted, so adding obligations is very likely to reduce the loan for which you are approved. Wait until after closing to go furniture shopping.

Do not originate any inquiries into your credit – Every time somebody pings your credit, it (can) lower your credit score. So even if you are just shopping with plans on buying something after closing, you can actually hurt yourself without even committing to buying something. Do not allow anybody (other than your mortgage lender) to pull your credit score until after closing.

Do not make large deposits without checking in with your loan officer – If you are receiving a larger-than-normal amount of money, ask your mortgage loan originator how to proceed. There are very specific rules and guidelines that they must follow in the loan approval process, and a large deposit could appear as another loan and terminate your home-loan approval. Keep your mortgage originator in the loop before you do anything significant financially.

Do not change bank accounts – By now, you should start to get the message that “change” is bad during the loan application process. Changing bank accounts falls into this category as well, as the banks want to see a history of your money flows. Changing accounts breaks up that flow and it is a common practice by people who wish to deceive the lender. Don’t put yourself under this scrutiny as it could very well lead to a termination of your loan approval.

Do not cosign a loan for anyone – Last but not least, do not cosign on a loan for somebody else. Even if the agreement calls for you to have no monthly obligation, your signature is actually an agreement to guarantee all payments thus your current lender will have to add that debt to your current list of obligations. It is best that you wait until after closing to take on any other debt.

Interest rates are great right now, but lenders are insanely picky. Underwriting guidelines are very strict, they may give you a break with one exception, but not two. And you will need to account for everything, so make sure you get an underwritten pre-approval before you start looking and keep your finances clean while you are shopping for a home. For recommendations on lenders who can provide you an underwritten pre-approval for your loan and make sure you are well informed, please feel free to reach out to me

Santa Clara Real Estate Guy

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