Categories: Rev. Dr. Charles Butler,
Prospective first-time home buyers must be aware and avoid making any financial mistakes throughout the home buying process. These mistakes can prevent you from successfully closing on your home and cost you a great deal of money. Several loan officers shared with me during a recent conversation some horrible and costly mistakes people have made that have caused their mortgage application to be denied towards the very end of the application process.
Remember you have completed the mortgage process until you have paid your down payment, signed the closing documents, and have received the keys to your property. Here are a few tips to keep in mind as you move forward to completing the final steps of this process: (1) do not open any new credit accounts or make any additional large purchases until after you have closed on the purchase of your property.
Every time you make a credit purchase your debt-to-income ratio (DTI) will be affected. If your DTI exceeds 43% you can be denied a mortgage. Lenders will pull your credit right up to the day of your closing. If there is any significant changes in your credit, you can be denied a mortgage.
(2) If possible do not change jobs or vocational careers until after you have closed on your home. Most lenders want to see a minimum of 24 consecutive months of work history. If you have changed careers, you will need 24 months in the new position before getting approval for your mortgage.
Lenders will verify your employment throughout the application process. However, some lenders have become a little more flexible with applicants regarding this requirement. They will decide on an individual case basis. It would be wise to check with your loan officer to confirm their policy on changing employment.
(3) Never, ever co-sign for a friend or a relative before completing the mortgage process. Co-signing can have a devastating impact on you completing the mortgage process. By co-signing you are assuming the entire debt for your friend’s purchase.
Again, the lender will have to recalculate your Debt-To-Income ratio (DTI) based on this additional debt amount. If your debt has now increased significantly, you have just placed your mortgage application in jeopardy of not being approved.
Under normal circumstances, these mistakes would not be considered detrimental except when you are attempting to successfully complete the mortgage application process. Then, they can be so devastating that your mortgage application will be denied, causing you to miss out on the opportunity to complete the purchase of your home. Do not lose sight of your goal that you have worked so hard to achieve; becoming a first-time homeowner.
Harlem Congregation for Community Improvement, Inc. (HCCI) offers a monthly home buyer education seminar series. If you are interested in attending the workshop or have questions regarding the home buying process, contact Rev. Dr. Charles Butler at (212) 281 4887 ext. 231or email at cbutler@hcci.org.
