3 Financial Moves You Shouldn’t Make When Buying a House
Written by
T. Woods
Edited by
Jenna Klaverweiden
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America’s current housing market is extraordinarily competitive and tricky, not to mention rather expensive. As such, you need to be smart and frugal with your finances when making the massive financial commitment of buying a home.
Amid the enormous stress of purchasing a new house, you might feel tempted to make a few of the following big moves or changes — but you might come to seriously regret it.
Here are three things you shouldn’t do when buying a house.
Buy a Car or Make Any Other Expensive Purchase
Perhaps with a new home, you’d like to see a new car in the driveway as well. Why not? You’ve already spent so much on a new home, so what’s a little more for a monthly car payment?
Well, as The Young Team noted, a car purchase (or any other expensive buy, such as pricey furniture for the new house) should be avoided, as your home loan approval “depends on your debt-to-income ratio” — and that could be affected by such flashy purchases. “Prioritize your home over expensive purchases at this stage.”
Change Jobs
You should also think twice about changing jobs during the homebuying process.
As a Farm Bureau Financial Services article put it, even a good career change could set you behind during the mortgage loan process, as any change in job status might “cause a lender to question your financial stability.” You want to project an image of financial and employment stability to your lender above all else, and a job change could affect that.
“Going from full time to part time, salary to commission and employee to contractor could all raise red flags,” the article stated. “Changes in the other direction, like moving from part-time to full-time employment or taking on a new role at the same company, shouldn’t impact your ability to close, but err on the safe side and consult your lending agent before making any changes.”
Max Out Credit or Open New Credit
You should also avoid taking on new credit or maxing out your credit cards when you’re in the process of buying a home, as that could have severe consequences.
The Mortgage Reports noted that maxing out your credit card — say, for items such as new furniture and home items — “is one of the worst things you can do before closing on a home loan,” as that extra debt will automatically offset your income. That will, in turn, decrease your mortgage financing.
Additionally, The Young Team suggested you avoid applying for a new credit card or closing a current account during the purchase process for your new home, as any such changes could negatively impact your credit rating during the crucial home loan approval process.
The journey to purchasing your own home can be a tricky and lengthy one. Use these tips to avoid any unforced errors along the way.
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