Buying a home in Orlando is an enormous process, but many home buyers don’t realize that there are some important steps to take before you even start the process. Or, more accurately, there are some important steps NOT to take. What you do just before starting the home buying process can make a big difference.
First of all, stay away from big-ticket purchases. Large appliances, electronics, vacations, and especially cars – anything that requires you to purchase on credit. The problem is that when you go to your lender to qualify for a mortgage, they’ll look at your “debt-to-income” ratio. This is the percentage of your gross monthly income that is spent on debt. Anything that gets paid monthly, including HOA fees, taxes, student loans, insurance, credit cards and, you guessed it, car payments. Having a high percentage of debt to income will make lenders wary of qualifying you for a loan. If you must purchase both, try to buy the home before the car.
Secondly, try to keep all of your money where it is for a few months. Not only does this mean no big-ticket purchase, but also try to avoid moving your money around from one account to another. When you go to qualify for a loan, the lender will want to see your source of funds, likely for the last two or three months. Deposits and withdrawals will have to be documented and provided to them. This means that if you move your money around a lot, you’ll have a lot more paperwork that you’ll need to provide your lender. If you can’t provide this paperwork, you probably won’t get qualified. Make it easier on both of your and try to keep your paper trail uncomplicated for a few months.
Third, if you’re thinking about changing jobs, try to wait until after you’ve purchased your new home. Of course, if you’re moving to another city or state, you may not have a choice. Just keep in mind the effects this change might have. Lenders will look at your income over the last two years to help determine your estimated future income. If you are a salaried employee and are moving to a similar job with the same (or higher) salary, then this shouldn’t be a problem. Your lender should feel comfortable projecting your future income based on your previous job. The same goes for hourly employees, as long as the pay and the hours are comparable. If much of your income is derived from commissions, however, there may be an issue. Even if you are changing to a different company with the same position in the same industry, there will be uncertainty in the eyes of the lender about your future commission prospects. The worst thing to do would be a drastic career change like, say, moving from a salaried job to being self-employed. This will make it impossible for lenders to accurately predict your income and they may not be willing to give you the loan. If you can, buy the house before changing jobs.
Buying a home is a complicated process already, you don’t want to make it even more complicated through the decisions you make before it even begins. Try to avoid these mistakes and you’ll be one step closer to (hopefully) a smooth home purchase.