Buying a home is a complicated process; from figuring out what you can afford to obtaining a mortgage to finding that perfect location. But, it can all be worth it when you find the perfect place for your family. With interest rates still relatively low, locking in that rate can be a plus for many buyers. Since summer is a popular time for home buying, I wanted to share a few reminders for those buying soon or looking to buy a home. Most mortgage companies will require at least 10% down to purchase a house so do the math to make sure you have enough cash on hand. And make sure you can afford the monthly payments for principal, interest and taxes in addition to things like utilities, groceries and other lifestyle expenses. Whew! No one ever said buying a home was easy!
In addition to all the things you need to do to prepare to buy a home, there are a few things you should not do when you are getting ready to close on your house. Without further ado, here are the top 5 things NOT to do when closing on a home:
- Don’t make any big purchase before closing. The bank providing your mortgage will question almost any big transaction you make while applying for mortgage. Your finances are under scrutiny until closing, so hold off on buying that new dining room set.
- Don’t apply for new lines of credit before closing. Your credit is monitored as well so if that furniture store offers you a new line of credit, hold off. The bank assumes you will be making payments immediately and changes like that can throw off your debt to income ration.
- Same with car leases. The bank sees it like any other debt payment and requires a hard credit check, so if you can hold off on the new car, it may be a good idea.
- Don’t switch jobs at the last minute. Even if it’s for the same or larger salary, the bank will have to re-verify your employment and may even go back to your prior employer to find out why you left.
- Avoid cash advances from credit cards. Many buyers need a little extra cash to close on their house. Some buyers borrow from a 401(k) or IRA, but if you borrow against your credit card you are running up more debt and could encounter double digit interest rates on that cash advance.
I hope these reminders will make sure you can close on that dream home without a hitch. I know it isn’t easy, but owning a home can be well worth the work. And if you are a Millennial who doesn’t think they can buy a home soon, know that it may be possible for you. Educate yourself and check out our book, The Millennial Money Fix, which comes out this August. You can pre-order yourself a copy today.