Good ideas that may not be good ideas
September 3, 2022
Sometimes what seems like a good idea in order to prepare for home buying may not actually be the best plan. Given each person's unique needs, up front planning is truly the key. As consumers we are often conditioned to shop first, buy second and then figure out how to pay for it. When we try to prepare for buying a home and yet are not used to planning as a consumer, it is easy to make mistakes when we are making well-intentioned efforts. Here are five common things people think they should do, assuming it's a good idea when it might not be.
1. Paying of "all" debts. It's not uncommon for people to want to pay off everything prior to beginning their home purchase journey. Less debt can be great for your debt to income ratio, but can actually have a negative impact on your credit score initially.
2. Moving money around. Sourcing and being able to track where money comes from in a real estate transaction is very important. If there is a lot of movement in and out of accounts, or cash taken or deposited- you could create a lot of extra paperwork for yourself.
3. Looking at houses first. Browsing online, visiting open houses or even asking an agent to show you homes may seem like a good idea first, but these window shopping activities could complicate your process if you end up falling in love but are not prepared, and then have to rush the process.
4. A new job. Getting a second job, or getting a higher paying job that is commission or bonus based. Having more qualifying income is great, but history for income outside of the standard paid W-2 primary job requires history.
5. Deferred Student Loans. Deferred student loans are common with home buyers, but guidelines require a payment be included if there is no payment plan in place. Often an income-based repayment plan will result in a lower payment than what loan guidelines would require on deferred student loans.
6. Closing unused credit cards. This is similar to what may happen when you pay off accounts. You may think there is no reason to have these accounts, but they actually may be helping you. Closing them could result in lowering your qualifying credit score.
Of course, some of these actions could actually still be good for your situation, but how would you know for sure? Navigating the lending process can sometimes be different than what you think. A pre-planning consultation with a Mortgage Professional, like me, versus an online pre-approval application is the key to early planning that is customized for your goals. Both can help you obtain your loan, but only one spends the up front time to plan with you, and looks at the proper do's and don'ts for your specific needs.
Alysha Boles is a Mortgage Loan Advisor and Debt Strategist that specializes in both the planning, pre-approval and loan process of mortgage lending. Licensed in California and Texas and the ability to connect you with a licensed professional in all 50 states. She can be reached at (661) 858-7214, or inquire online at http://www.advisoralysha.com.