Things
Not to Do Before Purchasing a Jacksonville Home
No Major Purchase
of Any Kind
Review the
article titled, "Don't
Buy a Car," and apply it to any major purchase
that would create debt of any kind. This includes furniture,
appliances, electronic equipment, jewelry, vacations,
expensive weddings...
...and automobiles,
of course.
Don't Move Money Around
When a lender
reviews your loan package for approval, one of the things
they are concerned about is the source of funds for your
down payment and closing costs. Most likely, you will
be asked to provide statements for the last two or three
months on any of your liquid assets. This includes checking
accounts, savings accounts, money market funds, certificates
of deposit, stock statements, mutual funds, and even your
company 401K and retirement accounts.
If you have
been moving money between accounts during that time, there
may be large deposits and withdrawals in some of them.
The mortgage
underwriter (the person who actually approves your loan)
will probably require a complete paper trail of all the
withdrawals and deposits. You may be required to produce
cancelled checks, deposit receipts, and other seemingly
inconsequential data, which could get quite tedious.
Perhaps you
become exasperated at your lender, but they are only doing
their job correctly. To ensure quality control and eliminate
potential fraud, it is a requirement on most loans to
completely document the source of all funds. Moving your
money around, even if you are consolidating your funds
to make it "easier," could make it more difficult
for the lender to properly document.
So leave
your money where it is until you talk to a loan officer.
Oh...don't
change banks, either.
Should You Change Jobs?
For most
people, changing employers will not really affect your
ability to qualify for a mortgage loan, especially if
you are going to be earning more money. For some
homebuyers, however, the effects of changing jobs can
be disastrous to your loan application.
How Changing
Jobs Affects Buying a Home
For most
people, changing employers will not really affect your
ability to qualify for a mortgage loan. For some homebuyers,
however, the effects of changing jobs can be disastrous
to your loan application.
Salaried Employees
If you are
a salaried employee who does not earn additional income
from commissions, bonuses, or over-time, switching employers
should not create a problem. Just make sure to remain
in the same line of work. Hopefully, you will be
earning a higher salary, which will help you better qualify
for a mortgage.
Hourly Employees
If your income
is based on hourly wages and you work a straight forty
hours a week without over-time, changing jobs should not
create any problems.
Commissioned Employees
If a substantial
portion of your income is derived from commissions, you
should not change jobs before buying a home. This has
to do with how mortgage lenders calculate your income.
They average your commissions over the last two years.
Changing
employers creates an uncertainty about your future earnings
from commissions. There is no track record from which
to produce an average. Even if you are selling the same
type of product with essentially the same commission structure,
the underwriter cannot be certain that past earnings will
accurately reflect future earnings.
Changing
jobs would negatively impact your ability to buy a home.
Bonuses
If a substantial
portion of your income on the new job will come from bonuses,
you may want to consider delaying an employment change.
Mortgage lenders will rarely consider future bonuses as
income unless you have been on the same job for two years
and have a track record of receiving those bonuses. Then
they will average your bonuses over the last two years
in calculating your income.
Changing
employers means that you do not have the two-year track
record necessary to count bonuses as income.
Part-Time Employees
If you earn
an hourly income but rarely work forty hours a week, you
should not change jobs. There would be no way to tell
how many hours you will work each week on the new job,
so no way to accurately calculate your income. If you
remain on the old job, the lender can just average your
earnings.
Over-Time
Since all
employers award overtime hours differently, your overtime
income cannot be determined if you change jobs. If you
stay on your present job, your lender will give you credit
for overtime income. They will determine your overtime
earnings over the last two years, then calculate a monthly
average.
Self-Employment
If you are
considering a change to self-employment before buying
a new home, don't do it. Buy the home first.
Lenders like
to see a two-year track record of self-employment income
when approving a loan. Plus, self-employed individuals
tend to include a lot of expenses on the Schedule C of
their tax returns, especially in the early years of self-employment.
While this minimizes your tax obligation to the IRS, it
also minimizes your income to qualify for a home loan.
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