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Buying a new house has always been a complicated and stressful process. That’s just the way things have always been. Nevertheless, doing so remains something that we all have to do at some point in our lives.
Naturally, we try to prepare ourselves as much as possible by doing tons of research on what to do when the time comes. That way, the process can then be a little less troublesome.
However, there’s also the matter of what you shouldn’t do, which is just as essential but barely ever gets covered. If you are currently thinking about buying a new home, here’s how these things could affect you and how to avoid them entirely.
Don’t do so after having very recently changed jobs
Usually, when looking for a mortgage lender, you look for that particular one that can cover all of your current needs. By itself, that already encompasses an elaborate process of evaluation to make sure that, in the end, your final choice is a worthwhile one.
However, were you aware that mortgage lenders also make a similar evaluation of you as a potential customer?
When assessing your loan application, lenders are mainly interested in knowing that your current job is profitable enough to cover all future payments. Likewise, they’re interested in learning that your performance in said job is stable enough to keep your paycheck flowing for the time being.
For them, failing to meet these requirements is more than enough reason for them to deny your application entirely.
How can they quantify this? By researching how long you’ve had your job. Typically, mortgage lenders want you to share your job history for the last 2 years. In there, they’ll want to make sure you’ve had your current job for at least six months, with a steady track record for any other past jobs.
Alternatively, suppose your work requires a constant shift between employers. In that case, you can still show an agreeable degree of stability to your lender by making sure they’re all in the same position within the same type of business and making sure your periods of inactivity are extremely short between one another.
That way, you give off an idea of being both an expert in your field and getting a job when in need of one.
Of course, every mortgage lender will have different requirements depending on their offered services, but these are the most common ones.
Don’t take any new debt
Let’s say you’re in a full-on renovation process. Maybe you’ve just moved into a new town and are in an ongoing effort to establish yourself as a citizen of that town properly.
You are considering your options right now, and you feel comfortable enough buying a new car and a new house at the same time. Well, even if your finances showed enough stability to manage both payments at the same time, you shouldn’t even attempt to do so.
All mortgage lenders will also look into your debt-to-income ratio, meaning the amount of money you owe overall to your monthly income.
Even if your current finances are strong enough to manage both monthly payments, a second debt will make a notorious difference in your debt-to-income ratio. This will lower your lender’s prospects when it comes to your capacity to fulfill your compromise with them, meaning they’ll more than likely reject your application.
Something worth mentioning, this is not exclusive to the purchase of a car but to any significant investment that will result in debt. In essence, try to make only one major purchase at a time, and this will increase your lender’s confidence in your ability to pay your debt to them in full.
Don’t miss any bills
Of course, it also makes a huge difference to be up to date with your bills.
A strong credit score will always be something that will attract the attention of mortgage lenders. Also, it could even help you qualify for a lower interest rate for your mortgage.
On the other hand, if you’re currently having trouble when it comes to paying your bills, you should instead focus entirely on that venture before thinking of buying a house.
Don’t lend more than you can give
Between friends, family, and coworkers, there’s this unspoken easiness and trust when it comes to asking for a small loan.
Regardless of how comfortable you feel with this idea, you should try as much as possible to avoid these kinds of situations—no matter who is the one asking in the first place.
Buying a property is an enormous responsibility, one that will require all of your financial focus. Even the slightest friendly debt could prove meaningful in your efforts. Keeping this in mind, you’ll want to make sure that all financial matters are solved and in check.
Don’t accept any request to cosign a loan
Just as it is with personal loans, there’s this easiness and trust when it comes to cosigning other people’s loans. And there’s nothing terrible about it; it’s only an instance of you helping out a friend.
This is true unless you’re interested in buying a new house. In that case, even the slightest risk could prove potentially harmful.
Assuming that your respective cosigner could not carry out their part of the deal, all consequences would fall onto you as well, including all legal and financial matters. And if that were to happen during your process of buying a house, lenders then would see it as bad credit and bad debt-to-income ratio.
In other words, it would be among your lender’s best interests to entirely deny your application.
Regardless of the trust you currently have towards your respective cosigner, you should opt-out of every external request to cosign any purchase. Give priority to your financial ventures. Make sure they can be carried out without any interference.