The Do's & Don'ts of the Homebuying Process
Considering that 87 percent of recent buyers financed their homes, most home buyers are likely to get a mortgage at least once in their lives. Just because most people go through the process, doesn’t make it simple or intuitive (NAR, 2020). That’s where highly trained Loan Officers come in – the one thing that people usually only do once or twice in their lives, Loan Officers literally do every day! We compiled a list of Do’s and Don’ts during the mortgage process to give prospective buyers a little insight into the process on what to expect and how to prepare before calling a lender!
- Don’t: Start looking for a home before you are pre-approved
- Being knowledgeable about what you can comfortably afford to pay for a home gives you a great starting point to begin your home search. It’s one thing to assume you can be financed for up to $300,000, but it’s another for a lender to confirm it. A pre-approval letter ensures that you aren’t wasting time looking at homes you can’t afford, and lets you shop with confidence.
- Do: Get preapproved
- Getting pre-approved for a mortgage is one of the first steps you should take in the mortgage process. By speaking with a lender and knowing confidently how much you can afford to pay for a home, you are able to make an informed financial decision. A pre-approval outlines the price range you should look in and shows the seller that you can put up the funds you are offering. Especially in a competitive market, a strong pre approval letter could mean giving the seller enough confidence to choose your offer amongst others in a multiple offer situation.
- Make sure you have an in-depth conversation about the amount you’re approved for. People can be pre-approved for more than they are comfortable with, but at Treadstone, we want to ensure that each of our clients don’t just become homeowners, but successful homeowners.
- Don’t: Make any large, unplanned purchases or cash deposits
- Making any large purchases could impact your debt-to-income ratio and affect how much money a mortgage company can loan to you. It’s probably just better to wait to pull the trigger on that brand spanking new fancy refrigerator until after you have your new home! Also, if you know you are getting a cash gift or have cash in a safe you plan to use toward your mortgage, be sure to deposit this at least two months before you plan on applying for a mortgage, or simply don’t deposit it at all. Cash deposits can compromise your mortgage, especially if they are untraceable – remember mortgage companies and underwriter need to know where the money came from, and where it goes.
- Do: Keep using your credit as normal
- Although making large purchases could negatively impact your mortgage approval, it’s important to keep using your credit as you normally would. So, if you typically pay via credit card, don’t stop now! Consistency is good for your credit score and shows lenders you can successfully manage debt.
- Don’t: Apply for new credit
- Again, any changes to your credit and credit history could affect your ability to be approved and how much you are approved for, so don’t take out any new loans for any purpose, co-sign any loans, apply for any new credit cards, or close any credit accounts while you are going through the mortgage process.
- Do: Keep making all your payments on time
- Make sure while you are in the process of getting a mortgage and looking for homes that you keep paying your bills and making your payments. Not making your payments on time could potentially impact your credit score and your ability to secure funding.
- Don’t: Change jobs
- Don’t make any sudden changes involving your income, credit or overall available financial standing while getting a mortgage. A job is the same way! If it can wait, it is certainly better to keep your employment the same throughout the mortgage process. If it is unavoidable or you plan on changing jobs soon, be upfront and discuss it with your lender from the beginning.
- Do: Call your Loan Officer for any questions or clarifications – they are your ally.
- Talk to your lender if you are considering any decisions that may impact your financial picture—no matter how big or small. What may seem like a minor change, could have big implications on your mortgage application. The goal is to keep your overall finances consistent throughout the entire process to avoid any issues.
- Don’t: Think you have to do it alone or become a specialist yourself
- Your Loan Officer is there to help you navigate the mortgage process, and they are mortgage experts, so don’t feel like you need to try and become one yourself. They are there for you to lean on and walk you through the entire process and ensure your success as a homeowner! At Treadstone, you and your financial well-being is always our priority.
- Do: Come prepared
Want to know what documents you need before you start the mortgage process? Check out our mortgage document checklist!
Getting pre-approved for a mortgage is one of the first steps you should take in the homebuying process!