Buying a Home—Some Financial Tips
Written by Ryan Ashby and Emily Rowley
You are buying a new home! Congratulations on that great decision. You have probably heard of common mortgage tips like; don’t take on new debt, don’t change jobs during the loan process, be careful with your credit, and things like that. We want to give you few less common financial tips that can help you through the mortgage loan process to make your experience as seamless as possible without surprises.
Don’t Make Large Bank Deposits
As part of your loan process, the loan officer will need to review bank statements. Your bank statement needs to be an official bank copy, including the bank’s name, your name, and full account number and at least a 30-day account history. But there is more they need to look for:
- Don’t make any large deposits (non-payroll) that can’t be documented or paper trailed. Yes, making large deposits in your account could affect your loan. If you need to make a large deposit, ask your loan officer on the best way to document it.
- Family gifts – if you are getting a gift from family for your down payment, make sure they keep the funds until closing. Your loan officer can have the gift sent directly to the title company at closing. Don’t deposit the gift in your account!
Down payments determine your options. Now is the time to save for a down payment. The amount you put down will determine several factors:
- If you have a 3% to 5% down payment there are good loan options for you, but you will also need mortgage insurance. Be sure not only to save for the down payment, but to plan for the monthly cost of that insurance.
- If you have 20% down, that mortgage insurance isn’t necessary.
- There are even certain zero down payment loan options available if you meet certain qualifications, contact your loan officer to discuss the requirements.
One topic that rarely gets enough attention what a buyer should expect to pay for closing costs. Many people have heard of them, but know what that means exactly. Closing costs typically consist of lender fees, appraisal costs, title charges, taxes, insurance and interest. Remember, we don’t want you to have surprises.
- Closing costs vary depending on your loan type and property type. You should typically plan on closing costs to range from 2% to 3% of your home purchase price. This is something to plan and save for, so you don’t have any problems closing on your home.
- If you’re buying a townhome or condo, you will also want to plan to pay for any upfront HOA fees from your community.
- You loan officer can help you with specific questions you have about closing costs, don’t be afraid to ask.
Be upfront with your loan officer about any financial information they may not see at the beginning. Odds are, they will find it during the loan process and this could negatively affect your loan qualification. Here are some examples:
- Do you pay child support, alimony, or have garnishments to your wages? Let your loan officer know about these things at the beginning.
- Have you had any bankruptcies or foreclosures in the past? Your loan officer can access the situation, but it’s best not to let it be a curve ball later.
These financial items are things to consider and plan for as part of the mortgage loan process. It will help give you an idea of things to save money for like down payments and closing costs, to help avoid surprises. Thinking about what to do with large deposits and being upfront with expenses will also help you to have a smooth loan, so you can close on your dream house.