Home->Buying->Things Not to Do Before Purchasing a Home
Things Not to Do Before Purchasing a Home
| No Major Purchase of Any Kind |
You see, when determining your ability to qualify for a mortgage, a lender looks at what is called your "debt-to-income" ratio. A debt-to-income ratio is the percentage of your gross monthly income (before taxes) that you spend on debt. This will include your monthly housing costs, including principal, interest, taxes, insurance, and homeowner’s association fees, if any. It will also include your monthly consumer debt, including credit cards, student loans, installment debt, and car payments. For example, suppose you earn $5000 a month and you have a car payment of $400. Assuming the current interest rate is 8% on a thirty-year fixed rate loan, you would qualify for approximately $55,000 less than if you did not have the car payment. Do not buy the car. Buy the house first! |
| Don't Move Money Around |
| When a lender reviews your loan package for approval, one of the
things they are concerned about is the source of funds for
your down payment and closing costs. Most likely, you will
be asked to provide statements for the last two or three months on
any of your liquid assets. This includes checking accounts, savings
accounts, money market funds, certificates of deposit, stock statements,
mutual funds, and even your company 401K and retirement accounts.
If you have been moving money between accounts during that time, there may be large deposits and withdrawals in some of them. The mortgage underwriter (the person who actually approves your loan) will probably require a complete paper trail of all the withdrawals and deposits. You may be required to produce cancelled checks, deposit receipts, and other seemingly inconsequential data, which could get quite tedious. |
