Even if you’re not a first-time buyer, purchasing a Pasadena home is rarely simple. Many things can go wrong during the home buying process, from house hunting to making an offer to closing negotiations. In today’s competitive market, purchasers must have a strategy in place to avoid typical pitfalls. You should undoubtedly know what you should do, but it’s frequently more vital to know what you should avoid. With that in mind, here are five things you should avoid doing before purchasing a home in Pasadena.
1. Quit Your Job or Make a Career Change
You must present proof of employment and demonstrate steady employment when applying for and getting pre-approved for a mortgage. So quitting your work or changing careers is one of the worst things you can do before buying a house.
“Job changes might cause loan complications, especially if your pay structure shifts from salary to commission, as commissions require a longer track record of revenue – often two years… A shift from salaried to hourly pay can also cause credit issues, as hourly workers’ earnings might fluctuate depending on how much they work.”
“[A]im for a consistent employment history of two years or longer at the same workplace or at least in the same line of work,” financial experts advise. Switching from one accounting company to another just before buying a home, for example, will not raise any red flags with your lender.”
2. Max Out Credit Card Debt
Taking on a lot of additional credit card debt is another thing you should avoid doing before buying a house in Pasadena. “Maxing out a credit card before closing on a house loan is one of the worst things you can do,” experts advise.
The concern is that the added debt and payments will affect your debt-to-income ratio, lowering the amount of mortgage financing you may get. It will also lower your credit score, which will likely raise the loan’s cost.
“[f]or the best mortgage rate – and in the aim of keeping debt levels low,” industry experts advise, “attempt to maintain your credit use below 30% of your overall credit limit.” This will help you raise your credit score, lower your bills, and qualify for the greatest house loan possible.”
3. Finance a Big Purchase
Before buying a property, you should also avoid making any large purchases that require financing. So put off getting that new automobile you’ve had your eye on for months or those new kitchen appliances your wife has been clamouring for.
Such “activities” are a no-no since a lender will conduct a last credit inquiry check before closing; if additional debts are added, the loan approval may be jeopardised. Taking out a car loan or financing a large-ticket item like a boat, wedding, or vacation might raise your debt-to-income ratio (DTI), making you appear to a lender as a less appealing borrower.”
4. Shop for a House Before Getting Pre-Approved
Before buying a house – before you even go house hunting – “it’s crucial to get a mortgage pre-approval. Otherwise, you could be setting yourself up for disappointment.”
Here are just a couple of reasons why pre-approval is so important . . .
“If a potential buyer discovers a home they like and then tries to be preapproved for a loan, the house may be sold before they complete the process. Furthermore, many owners want to show their home only to serious purchasers and will ask for a preapproval letter from the buyer.”
Getting pre-approved will also let you know how much you can actually borrow and how much home you can afford. “A lender will verify your income, credit history, and assets as part of the preapproval procedure. A lender can only accept you for a house loan and tell you your true price range after validating these documents.”
5. Assume You Have to Pay 20% Down
Finally, you should not assume (and act on the premise) that you have put down 20% of the purchase price when buying a house in Pasadena. That used to be the case, but not any longer. So don’t allow that stumbling block stop you.
Although paying 20% down has certain advantages like allowing a lower monthly mortgage payment, it’s not really a requirement today because buyers, especially first-time buyers, have other options. These include:
- VA Loans – 0% down
- USDA Loans – 0% down
- FHA Loans – 3.5% down
Even with some conventional loans today, you can get by with as little as 3% to 10% down – though you will have to pay for private mortgage insurance.
“Waiting until you have 20% down can cause your house purchase to take years longer. And the longer you wait to buy, the higher property prices you’ll be chasing, which will almost certainly necessitate a larger down payment.”
What You Should Do Before Buying a House in Pasadena
These are the top 5 things you shouldn’t do before buying a house in Pasadena (though there are others). However, there is one thing that all buyers should do. And that is to collaborate closely with a seasoned Pasadena representative. A local realtor will have a solid awareness of the local market and what it takes to get you the house you desire at the best price possible. So, if you’re thinking about buying a house, give us a call at (713) 766-0442.