Preparing to Buy a Home
Now that you have made the decision to purchase a home, you should take the time to prepare, financially, for this large investment. There are things that you should make sure to do, and not to do, in order to be set financially and for the purchase. Just being aware of these items and following this guide can have an impact when it comes time to get approval for your home loan.
It is common that during the course of saving up for that hefty down payment you want to splurge on a large ticket item such as buying a car, new appliances or electronics, jewelry, or even go on vacation. By making these purchases you impact your credit, even if you make payments on time, or even large payments up front. While it is natural to assume that since you are good at repaying debt that the purchases won’t impact your credit, even the addition of large ticket items to your credit cards can cause an otherwise solid loan to be disapproved.
One item lenders concern themselves with is the source of funds for your down payment and closing costs. You will likely be asked to supply statements for the last quarter of all your liquid assets. This may include your checking and saving accounts, money market funds, certificates of deposit, stock statements, 401K and retirement accounts, and mutual funds. Moving money, even in between your own accounts, during the period in review, may be seen as instability, and trigger a request from your mortgage loan underwriter to require a complete paper trail of all withdrawals and deposits. They may further request cancelled checks, deposit receipts and any other transaction statements for review. This not only increases the amount of time that it can take to underwrite your loan, but also the chances of errors, miscalculations and mistakes ultimately causing your loan to be denied.
Moving money around causes more work for the lender and yourself, to provide adequate information regarding the source of your funds. They are required to eliminate potential fraud and ensure quality control for your mortgage loan. Even the consolidation of funds to make it “easier” on you, could make it more difficult for the lender to properly document and approve your loan. It is always best to consult with your mortgage loan officer prior to making moves, outside of anything that has been continually occurring within your accounts for several months.