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First Time Homebuyers Mortgage DON’T Tips

First time home buyers tips help you to be prepared before closing but as importantly, AFTER you are pre-approved for a mortgage. In fact, buyers ruin their chances of closing by making simple mistakes once they hear the word “approval” from the mortgage broker. These are some of the most common mistakes people make and most importantly explain what NOT to do as the best First Time Homebuyers Mortgage Tips.

Do Not Start a New Job (please!)

While it is not the most important item for getting a pre-approval, job history and length of time at your present employer is vital to getting approved as a First Time Homebuyer.

If you have been at your current job for more than 2 years, wait until the mortgage is closed before choosing to switch to another company.

Do NOT Purchase a New(er) Car (I beg you!!)

It is so easy to understand the temptation to buy a vehicle after getting a mortgage pre-approval. Most people are a bit nervous and are filled with excitement when they learn they are pre-approved.  If their credit and income are good enough to buy a house, then surely it is good enough to get a great deal on a car, right?

The pre-approval issued by the lender was determined by the current level of debt and income at the moment the person applied for the home loan.

It is best to wait until the loan has closed before trading up on your vehicle.

Do NOT Make a Late Payment on ANY Existing Debt

As previously stated, the pre-approval is determined by a snapshot of your credit at a particular point in time. The track record that you have is documented by the credit report used for your approval. The majority of lenders will request a new credit report for you approximately one or two days before the loan closing. Any late payment that shows up could be a red flag to the lender and cause them to turn down the loan.

So, to be safe, make all payments on time while waiting for the lender to finalize your loan.

Avoid Any Unusually Large Deposits

The best First Time Homebuyers Mortgage Tip is that your credit report shows a track record of your payments over time, your bank account also has a track record. The mortgage underwriter will review your checking and savings account to see if there are any larger-than-normal deposits in the months leading up to the purchase. Avoid any large deposits that do not coincide with your normal banking habits.

Do NOT Open a New Bank Account

We previously mentioned that you should not switch jobs or add any new debt. The theme is consistency and this point fits within that theme.

Whether you have used your current bank for 6 months or 6 years, it is best to stick with that bank until the loan closes. Opening up a new account creates questions among mortgage lenders. They wonder if you are trying to hide funds in one account or if you have unrecorded debt obligations that are going to be facilitated with the new account.

Do NOT Spend your for Down Payment or Closing Costs (no Vegas trips…)

Buying a home can be exciting but also stressful. Getting the utilities switched to a new address, changing the address and hiring the movers can all take time and some funds. While you may have saved up a nice nest egg to prepare for the home purchase, don’t spend all of that money.

The estimate provided to you for the closing is just an estimate. Things like property taxes, homeowner’s insurance, and other costs can creep up and cost a bit more than anticipated. 

Do NOT Close Out Any Debt Account (First Time Homebuyer 101 tip)

It is usually a good idea to pay down debt and close the account, whether it is a credit card, furniture account or local store account. Keeping your debt as is until the mortgage closes, is key here.

Closing out a credit card, for example, may lower your credit score. Remember the pre-approval is a snapshot in time. Keep the picture the SAME as at application time.

The bottom line, leave all accounts open for the time being.

Do NOT Agree to Co-Sign on a New Loan

As mentioned in the First Time Homebuyers Mortgage Tips, borrowers should avoid any new debt, especially in the form of buying a new car. This is also true for other new debt such as new credit cards, new furniture accounts or an unsecured loan. This is especially true for being a co-signor on a loan.

If your mortgage broker told you that you were approved for a mortgage, do not co-sign for a friend or relative. Becoming a co-signer makes you 100% responsible for the new debt, regardless of the good intentions of your friend or relative. This one area is a big no-no for potential homebuyers.

Do NOT Ignore Requests from Your Broker ;)

Think of a lender as a person very similar to you, they are merely trying to do their job. In this case, their job is to help you the First Time Homebuyer.

Sometimes a mortgage underwriter will ask for very specific things. It is not uncommon for an underwriter to request documentation supporting a sale of a car, major change in job or explanation for one missed payment from 14-36 months ago!

If your broker contacts you and asks for some type of document or explanation, be prompt and thorough in providing the answer. Your entire loan could hinge upon this one item and you don’t want to get rejected because you could not find the time to respond to the lender’s inquiry.

Summing Up What Not To Do Before Closing on a House a First Time Homebuyers Mortgage
After you have received your mortgage pre-approval, continue on with your life as if nothing has changed. Keep making payments on time, don’t close out any accounts and don’t add any new debt. Along with the other suggestions above, this should keep you prepared and ready for closing day and a master at First Time Homebuyers Mortgage Tips.

What’s in a Good or Bad Credit Score

For many clients in the pre-approval process, their credit report and credit scores are a source of stress and mystery. Even with the endless information available at the click of a mouse, there seems to be no straightforward summary on what doesn’t and doesn’t affect them.

So, what determines a good (or bad) credit score?

Good Credit

From the time you get your very first credit card, your credit is being built. Keep in mind these relatively simple habits to develop that will ensure you achieve a desirable high number.

  • Pay your credit cards and all bills on time –including your cell phone and Internet!
  • Pay your parking tickets on time – that’s right, unpaid tickets will affect your credit score.
  • It’s ok to have more than one credit card, but keep it under control. The key is to not be continuously using your limits to the max! A good rule of thumb is keeping utilization under 30% of your available credit.

Myths

It is a common misconception that once a credit account is closed, you are no longer liable to pay; maybe the refusal to pay is rooted in principal, perhaps from a dispute with the cable company over a late charge. No matter the reason, once the creditor has reported the missing payment, you score goes down for 120 or until the creditor closes the account. But it doesn’t end there; they may send your account to a collection agency that will then add their own feels. The worst part, you now owe more money! The longer this goes on, the worst of an effect it has on your credit and the more difficult it becomes to recover you score.

You may have also heard that your credit score falls every time it’s checked. This is not necessarily true. Sites like Credit Karma allow you to check your score as many times as you like without damaging your score – although theses score may not be exactly what the credit bureau holds, they are certainly a good indication.

What DOES affect your score is a lender or creditor looking into your credit report. The more times lenders check (especially in a short period of time), the greater chance your score is going to decrease.

The Benefit of Using a Broker

To address that last point; many mortgage shoppers will have their credit pull multiple times within a short time frame when shopping around at various lenders (who each look into their credit report).

A huge benefit to using a broker is we will only check your credit once! Of course, that certainly doesn’t limit our reach; we have access to all sorts of lenders and the in depth knowledge of each lenders criteria for qualification, so we can find the perfect one that meets all your needs!

How to get a copy of your Credit Bureau

Lenders look to credit reports to assess the risk of a given borrower. Your credit score is a number from 300 to 900 that reflects how you have handled your finances in the past. The lower the number, the more risky you appear to lenders, so you are likely to be offered higher rates. It is always recommended to keep an eye on your credit. In Canada, you can receive a free copy of your credit report once a year from both Equifax and TransUnion. The bureaus refer to your credit report as “client file disclosure” and “consumer disclosure” respectively. Ordering your “free report by mail” does not effect your score. Check your report for errors inconsistent with your true financial history and balances such as late payments; amount owing; or missing accounts. If you do find an error, report it it to the credit bureau to be corrected.