Before you buy a house don't.....

I have seen it all. Some clients say that have great credit and it's really bad or people claim to have a higher income than what appears on their pay stub. The truth comes out eventually. Lenders are required to pull your credit and in most situations require proof of income. There are few things however that you should not do before you buy a home.

1. Don't move money- most mortgage loans require liquid assets in reserves. This can affect your rate and even your eligibility to receive a loan. The mortgage company also needs to know where you down payment funds are coming from. They often request two or three months of statements. If they see big deposits they will want a paper trail so they know there has been no new debt. Underwriters want to make sure they are calculating your DTI (see previous blog entry). If you move money from account to another you may be able to document it, but it makes things a lot more difficult for the underwriter. So do not move money around unless you want the added stress. This includes checking accounts, savings accounts, money market funds, certificates of deposit, stock statements, mutual funds, and even your company 401K and retirement accounts.

2. Don't add any new debt until after the mortgage is closed. This can add a significant debt to your DTI ratio and make you ineligible for the loan or effect you interest rate in a negative way! I once worked on a loan for a gentleman who went out and bought a new truck. Due to the nature of the loan we were required to pull an updated credit report and the new debt made the customer ineligible for the loan.