5 Things Buyers Must Not Do When Buying a Home

When it comes to buying a home, there are several things buyers must do to ensure a smooth and successful transaction. However, there are also things they must avoid doing to prevent potential roadblocks or complications. Here are five things buyers must not do when buying a home.

1. Open a New Credit Card

A buyer's credit score plays a crucial role in determining their eligibility for a mortgage loan and the interest rate they will receive. Therefore, it is essential to maintain a healthy credit score during the home buying process. One common mistake buyers make is opening a new credit card to finance home-related expenses.

While it may seem like a practical solution to finance home improvements or furniture, opening a new credit card can negatively impact the buyer's credit score. It can increase their credit utilization rate, which is the amount of credit they're using compared to the total credit available. High credit utilization can indicate financial distress and lower their credit score, affecting their ability to get approved for a mortgage loan or obtain favorable interest rates.

2. Change Jobs

Another critical factor lenders consider when approving a mortgage loan is the buyer's employment status and income stability. Changing jobs during the home buying process can raise a red flag to lenders and affect the buyer's ability to secure a mortgage. Lenders prefer borrowers with a stable employment history and consistent income because it indicates financial reliability.

If a buyer changes jobs, they may have to wait for a few months to establish a steady income track record to satisfy the lender's requirements. In some cases, changing jobs may also affect the buyer's debt-to-income (DTI) ratio, which is another critical factor lenders consider.

3. Quit a Job

Quitting a job during the home buying process is even riskier than changing jobs. It can trigger a lender to deny the mortgage application or cause significant delays in loan processing. Lenders verify employment status and income by contacting the buyer's employer, and if the buyer is no longer employed, the lender may require additional documentation or proof of income.

Quitting a job can also affect the buyer's DTI ratio, which is the percentage of their monthly gross income that goes towards debt payments. If the buyer quits their job, they may have to find alternative ways to pay off their debts, such as using their savings, which can affect their debt-to-income ratio and, in turn, their ability to qualify for a mortgage.

4. Buy a Car or Furniture

Buying a car or furniture during the home buying process can also harm the buyer's credit score and financial stability. Any major purchase or loan application can show up on the buyer's credit report and affect their credit utilization rate and DTI ratio.

Lenders typically advise buyers to avoid making any significant purchases or applying for new loans before or during the home buying process. Doing so can affect the buyer's creditworthiness and financial strength and jeopardize their chances of securing a mortgage.

5. Make Large Deposits or Transfers

Lastly, buyers must avoid making any substantial deposits or transfers during the home buying process, as it can raise questions about the source of funds, and lenders may require additional documentation to verify the buyer's financial history and stability.

Large deposits or transfers can also affect the buyer's credit utilization rate and DTI ratio, as it can show up as an increase in liabilities or assets, affecting their creditworthiness and ability to qualify for a mortgage.

Conclusion

Buying a home can be an exciting and stressful process, but avoiding these five common mistakes can make it smoother and more successful. Buyers must maintain a stable income and employment history, avoid making any significant purchases, and keep their credit score healthy to ensure a smooth and hassle-free home buying experience.