Buying a home is quite possibly the biggest financial investment you’ll make in your lifetime. Before and during the process, it’s important to keep your finances consistent and keep a close eye on your expenses.
DON’T: Change or quit your job, go from salaried to commission-based compensation, or start or stop a business.
DO: Keep your employment consistent. To secure financing for your dream home, stability is key. Generally, lenders are looking at your last two years of employment and income history to determine if you qualify for a loan. So, if you’re considering a home purchase in the next two years, consider delaying any employment-related changes.
DON’T: Change banks, open or close any accounts, or make large deposits.
DO: Maintain your credit score by keeping the accounts you currently have open. Again, stability is key. Opening and closing accounts can affect your FICO score and raise red flags financially. If you’re looking to consolidate your debt or tweak your finances to better suit your needs, it’s best to wait until after you close on your new home. Finally, make sure the funds you’ll use for a down payment are deposited a few months before you’re ready to apply for a loan. Large, recent deposits are another red flag to lenders.
DON’T: Make large purchases or incur any late fees.
DO: Manage your debt, including credit card debt. The more debt you have to your name, the harder it will be to secure a home loan. The same goes for co-signing for another loan. Even if you’re not making the loan payments, co-signing adds to your debt total.
DO: Watch your spending. You’ll need money for a down payment, closing costs, and the unexpected expenses that come with moving into a new home. Hold off on the big spending until you’re officially a homeowner.
DO: Pay your bills on time. It might seem obvious, but it’s too important to ignore. Making payments on time is one of the most effective ways to improve your credit score and your eligibility for a home loan.