If you're going to be purchasing a new home in the next year, now's the time to start preparing for the loan process. You might not realize this, but what you do in the upcoming year will have a direct effect on your home loan. Some of your actions will have a positive effect on the loan process, while others could cause a serious snag for you. To help you with potential pitfalls in the loan process, here are three tips you should follow.
Don't Switch Jobs
When it comes to buying a new home, one of the biggest mistakes you can make is switching jobs. Your lender, someone at a place like Charles Swigart Home Loans, is going to be looking for proof of a stable income. If you've recently switched jobs, it could send up a red flag that will stop the loan process in its tracks. If you're considering a career change, or just looking for a new employment opportunity, wait until after you've purchased your new home.
Avoid New Lines of Credit
When you apply for a home loan, the lender is going to go over your credit report with a fine-toothed comb. They're going to be looking at the credit score, but they'll also be looking at the age of your credit history. You might not realize this, but even when you have good credit, opening a new line of credit can cause a dip in your credit score. Not only that, but a new line of credit will also decrease the age of your credit, which can also be a red flag for potential lenders. To avoid problems, don't open a new line of credit until after you've closed on your new home and you have the keys in your hands. It's also important to note that you'll need to stay up-to-date on all your current credit obligations. Even one recent missed payment can delay the loan process.
Maintain Your Bank Account
In addition to looking at your employment history and your credit report, potential lenders will also look at your banking history. They're going to want something to look at to determine how you spend your money and how much money you receive each month. The best way for them to do that is through your bank account history. In most cases, lenders are going to want to see copies of at least two years worth of your past bank statements. If you've recently changed banks, there's going to be a break in the statement history, which could pose a problem for you. If you're planning on changing banks, wait until after you buy your new home.