Buying A House? 2 Things Your Mortgage Broker Might Ask You To Do

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After saving carefully for years and scouting out the house of your dreams, you might finally be ready to meet with a mortgage broker and get the deal done. However, before you start picking out your furniture and meeting the new neighbors, you have to endure a careful financial examination from your lender. Here are two things your mortgage broker might ask you to do after you apply for a loan, and why:

1: Hold Off On Large Purchases

Although TV shows might make it seem like real estate deals are initiated and finalized in hours, the fact of the matter is that most people wait weeks to close on their house. This timeframe gives you the opportunity to do things like home inspections, and your lender the time to carefully evaluate your ability to pay your mortgage. Unfortunately, if you make large purchases during due diligence periods, it could alter your ability to successfully apply for a home loan. For this reason, your mortgage broker will ask you to hold off on making large purchases until you close on your house.

Here are a few things brokers carefully evaluate, and why something as simple as a furniture purchase could skew your financial portfolio:

• Back End Ratio: Believe it or not, your total house payment isn't the only expense lenders evaluate during financial due diligence period. Your banker will also look at your back end ratio, which is the sum of all of your current debt commitments. This includes things like car loans, credit car payments, and student loan payments. To qualify for a mortgage, your back end ratio should be under 36% of your total income. Unfortunately, if you buy something big on your credit card, it could skew this ratio.
• Down Payment: When lenders evaluate your home loan, your down payment is a big part of the picture. In addition to determining the cost of your monthly private mortgage insurance, the money you have saved might also be needed for things like closing costs—which are typically 2-5% of the total purchase price of the home. If you buy a new set of leather furniture and your savings dips below what lenders need to get the deal done, your mortgage might fall through. 

To stay on the safe side, stay in close contact with your mortgage broker during the approval process. Call or email your broker before you make any purchase that would be considered out of the ordinary. It might seem like a hassle, but you could protect yourself from jeopardizing your own home loan. 

2: Pay Attention To Your Monthly Bills

Your payment history represents a whopping 35% of your overall credit report score, which is why paying close attention to your bills is so important during your mortgage application. If you get busy and forget to make a credit card payment, it could affect your interest rate or your ability to qualify for a mortgage at all. Believe it or not, just one late payment can drastically reduce your credit score, especially if you traditionally have excellent credit.

To ward off problems, consider paying your bills ahead of time or setting up auto-pay. Carefully evaluate your finances on a daily basis to make sure that all of your obligations are met. Talk with co-signors on your loan to make sure that they do the same thing. If your husband is in charge of paying the bills and misses a payment, it could affect your ability to buy a house together.

By carefully following your mortgage broker's advice, you might be able to streamline the mortgage approval process and score the house of your dreams. Talk to your mortgage broker for more info.

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28 August 2015