With a never-ending list of everything you “should do” when purchasing a home in St. Augustine, it may seem counterproductive to focus on what you shouldn’t do. However, being aware of the don’ts is just as important as the do’s when it comes to making the biggest financial investment of your life, especially in the competitive Northeast Florida real estate market.
Knowing what not to do might just help you secure better financing and find the home of your dreams in beautiful St. Augustine.
It may seem obvious to avoid things like switching jobs or co-signing a loan, but did you know that even depositing cash or financing new furniture could impact your ability to get a mortgage in?
As lengthy as your “to-do” list is when purchasing a property, make sure you also keep a “not-to-do” list handy. This will help you avoid common mistakes that could delay or jeopardize your home purchase.
#1 Don’t overestimate what you can afford
Before starting your search for the perfect home in St. Augustine or Northeast Florida, it’s crucial to get pre-approved for a mortgage. Shopping for homes outside your budget is a waste of time and can be emotionally draining, especially if you fall in love with a property you can’t afford.
And you will be disappointed if what you are pre-approved for is substantially less than what you thought.
It is best to run the numbers yourself before meeting with a mortgage broker. Mortgage brokers will likely do a debt to loan ratio. Meaning, they take your monthly debt and divide it by your monthly income. Most mortgage brokers want to keep your debt to loan or DTI below 33%. So for example, if your debt is $1,500 a month (and debt accounts for debt obligations like car payments and student loans not bills like you cell phone or power bills) and you make $6,000 a month, your DTI is 25%. They will calculate your new monthly mortgage to make sure your overall DTI is below 33%.
A great way to understand your own spending habits is to track them. There are a number of apps you can use like Mint or Itab that allows you to record your daily purchases. There is a section for you bills and you can calculate how much you are saving a month as well.
Once you allot for things like taxes and vacations you will have a pretty good idea of where your money is going. Replace your rent or your current mortgage payment with a monthly mortgage payment you would feel comfortable with and make sure you are in that ballpark when getting a loan.
You know your own lifestyle, if you like to travel and dine, than you may want to make sure you will have the disposable income that suits your own life.
#2 Don’t get emotionally invested
Finding your dream home in the historic city of St. Augustine can make it easy to get emotionally attached, but it’s important to keep your emotions in check. Whether it’s multiple offers or issues from a home inspection, real estate transactions can be unpredictable.
Go in the home buying process with high intention and low attachment. It will keep your spirits high when looking for that perfect place.
#3 Don’t make any large purchases
While you’re preparing to purchase a home, avoid large purchases like a new car or home furniture. Your mortgage pre-approval in Northeast Florida is based on your financial standing at the time of application. Any large expense could lower the amount the bank is willing to lend.
As tempting as it is to envision furnishing a new property or parking your new car in the driveway of your dream home, hold off till you close on the property and are sure you can afford it.
#4 Don’t take out or put in large amount of cash from your bank account
Depositing or withdrawing large sums of money from your bank account can raise red flags for lenders. This is especially important when buying a home in a desirable market, where properties can move quickly. Keep your financial activity consistent.
A parent or family member may have gifted you part of your down payment in which case they may need to sign a letter stating that the money was a gift and you will not be paying them back. If you did in fact have to pay them back, it would be added to your monthly debt.
If you do happen to get a large sum of money from selling something like a car or if someone pays you money back that is owned, you may just have to prove it was from a legitimate source.
Most lenders will look at up to 60 days worth of bank statements. It is best to get your documentation organized prior to applying for the mortgage and make sure you can account for any large withdrawals or deposits.
#5 Don’t apply for more credit
How much you will get to finance your house will come down to how much money you have saved and how much money you have coming in, or your capital. Any extra debt will decrease the amount you are approved for so adding anymore credit can greatly affect how much your loan will be.
#6 Don’t co-sign a loan
This may seem like common sense but if a friend or family member needs you to co-sign a mortgage then you might not think anything of it. But co-signing a loan can really effect your own chance of being able to get one.
If they default on their mortgage then you are responsible for the payments, which in turn would affect your ability to make your own. In cases like these, it is best to protect your own financial interests.
#7 Don’t finance anything
Along with new home purchases comes new appliances, new furniture and maybe a new big screen TV. But financing anything when applying for a mortgage or prior to closing will do more harm than good.
Stay clear of the temptation to get every last thing you need for a new home and focus on your ability to afford it in the first place.
#8 Don’t switch a job, leave a job or start a company
Your ability to show you are financially stable is the single biggest determinant in getting a mortgage. Quitting a job or switching jobs can aid in your potential risk to a lender that you are not in a good financial or stable position.
If you are planning on applying for a new position or starting a company, it is best to do it once you have closed on the property. And of course, try not to get fired.
#9 Don’t miss loan payments
If you do have any loans you’re paying off, make sure you do not miss any payments. You likely haven’t missed any if you have good credit, but be extra cautious when applying for a mortgage.
Sometimes they’re honest mistakes like having been away for work or on a trip for a substantial amount of time. Or maybe you were in the hospital or a family member was sick so you were not as on top of your bills.
But having a 30 day missed payment can drop your credit by more than 100 points. So be sure to stay on top of your finances, especially when your credit score is crucial to your pre-approval.
#10 Don’t switch banks
I mean you likely don’t switch banks very often, but sometimes banks offer freebies like televisions sets or cash back when opening an account. It can be tempting, especially given the timing, but detrimental to a mortgage pre-approval.
Stick with the bank you have now so you will be able to provide at least 60 days of transactions and bank account balances. It may seem minor but can make your life a lot more complicated than it needs to be if you switch your bank last minute.
Conclusion
The list may be longer than expected, but avoiding these common pitfalls will ensure you stay on track when purchasing a home in St. Augustine or anywhere in Northeast Florida. By getting your finances and documents in order before applying for a pre-approval, and by being mindful of what not to do, you’ll make the home-buying process smoother and more efficient.
Hold off on large purchases, stay loyal to your bank, and keep your financial records clear. Contact us for more personalized tips on how to achieve the keys to your dream home, which will be well within reach!