Purchasing a home is not something that gets taught in school. Often, the decision comes based on discussion with family and loved ones, along with some deep introspection into your life and financial situation. While it’s true that the third time is often the charm, most people aren’t interested in failing at purchasing a home before they get it right. Here are a few mistakes that you can avoid as you start the process of buying a home:
- Avoid taking out additional lines of credit in the 6 months leading up to your loan application. Not only does it lower your credit score, but it can also tell your lender that you depend too much on credit for everyday expenses. You’ll also want to keep your debt to income ratio low, which you can only do by avoiding adding extra debt onto your existing payments.
- Talk to multiple lenders. Every lender has different expectations for their clients, so getting approved could be a matter of finding the lender that fits in with what you’re offering.
- Don’t max out the limit on what your lenders are offering. Just because they’re willing to give you $350,000 doesn’t mean that you should spend it. Instead, find a home that fits your needs and celebrate that your mortgage is lower and that you’ll be paying a lot less in interest in the long run.
- Gather your documents early, especially if you have trouble keeping up with financial documentation. Most lenders will ask for W-2s and 1099s from 2 years ago. If you haven’t held on to that documentation, you’ll need to start making phone calls to get it. Fortunately, employers are asked to hold on to that information for up to 6 years, which means that you’ll have access to it. It may take a while to get to you, though. Be prepared.