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Dos and Don’ts of Taking Out a Home Loan

• Come prepared. When taking out a home loan, you’ll need to provide several necessary documents, such as two years of W2s, two years of federal tax returns, two months of current asset statements for all your accounts, and recent paystubs. Preparing such documentation ahead of time will help streamline the process of taking out a home loan.
• Maintain or improve your credit score. Drops in your credit score due to late payments or credit inquiries can hurt your chances of being accepted for a home loan. As such, you should seek to maintain or improve your credit score by staying on top of payments and avoiding taking out new lines of credit.
• Pay off debts. Your lender will consider your debt-to-income ratio when qualifying you for a home loan. By paying down your debts, you’ll appear less risky to lenders, and your chances of qualifying for a home loan will increase.

Don’ts of taking out a home loan

• Don’t change your employment status. Quitting or changing your job during the process of taking out a home loan can make it difficult for the lender to determine if you’ll be able to repay the loan. As a result, they could deny your loan.
• Don’t lie. The lender will ultimately uncover any dishonesty on your part. Altering documents or providing false information regarding your finances will likely result in your loan being rejected.
• Don’t make large purchases. When you’re trying to take out a home loan, you should focus more on saving than spending. If your lender notices unusually large purchases while considering your financial history, they may decide to reject your loan.