If you’re in the process of buying a home, you’ve probably already met with a lender who advised you on what to do and what not to do during the escrow process. But if you’re just getting ready to buy or plan on doing so in the near future, following a few financial tips can mean the difference between qualifying…and not, and also getting a decent rate. These are a few universal “don’ts” that will help you stay on track, even before you get a lender involved.
Don’t take out more credit
If you’re thinking you’re going to buy a house in a matter of a few months, forget that new laptop on the Best Buy card, forget that new car, and forget that Old Navy card. Sure, it’s only a $30 pair of pants. But, taking out more credit can harm your debt-to-income ratios, which can make you look like a credit risk. And that’s not worth it, no matter how cute the pants are.
Don’t pay off all your current credit cards
Your lender will tell you specifically what you should pay down and what you should leave alone, but banks tend to like responsible credit management. In some cases, that may mean carrying a small balance on one or more cards.
Don’t charge up all your cards to the limit
“Responsible credit management” does not mean running every available card up to the limit and/or only making minimum monthly payments. Banks will not look kindly on this when you go to get approved for a loan.
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