On O’ahu, our median home price is almost $600,000. Not a whole lot of people would be able to buy a home all in cash. The majority of us need the help of lenders to aid us in buying a home. Over the last few years, the lending guidelines have tightened up quite a bit since the housing bubble. What does that exactly mean? Simply put, it makes it harder for the average person to apply for and get approved for a loan.
If you have been approved for mortgage and bought a home in recent months, congratulations! There is no doubt buying a home during these tough economic times is an accomplishment. For many first time homebuyers out there, here is one tip that is often overlooked but can kill transaction indefinitely. Don’t use your credit during your home buying process.
Let’s say you have been approved for a loan, and put in an offer for a home that was accepted. You are super excited about buying your new home and you run to your local superstore to shop for appliances… STOP! Don’t do it! I know it is exciting and you want to outfit your new home. However, if you’re not careful how you use your credit during this time, your mortgage lender may pull your credit report again and your credit score may have dropped or perhaps now your debt-to-income ratio is now off and disqualifies you for a loan. These ratios and guidelines are not discriminatory…. they are guidelines and the people reviewing loan applications follow them. Unless you have all the cash, this is the way it’s going to be until guidelines loosen up. So far as what the loan officers are telling me… it’s not going to ease up anytime soon.
Your safest bet is to refrain from ANY purchases made with credit, including vehicles. If you’re relocating and in need of a vehicle and was planning on purchasing one, check with your loan officer and consult with them on when it may be a good time to buy it. In some cases, even making large cash purchases can change things in your loan file. In any case it is only a short frame of time, perhaps 45 to 60 days that you may have to hold back until your can make your purchases again. Buying a home, for most people, is the largest asset they will purchase in their lifetime. Don’t sabotage your dream and wait to spend until after the transaction closes and you have the keys to your home!