2. Don’t shuffle money between accounts or between banks. When your loan package goes in for approval, the lender is going to examine your source of funds and ask for financial statements for the past few months. It’s very likely that the mortgage underwriter will ask for a paper trail of all the withdrawals and deposits which will include deposit receipts, cancelled checks, proof of transactions, etc. This is additional homework that can be quite time-consuming.
3. Change jobs. (If you are a salaried employee with no commissions or bonuses, then this does NOT apply to you. Or if you are an hourly employee and work without overtime, this shouldn’t affect you either.) Here’s why you don’t want to change jobs if you fall into one of these categories:
Bonuses: Much like commissions, bonuses are averaged from the past two years when calculating your income. If you are switching jobs, they mortgage lender has no basis in which to forecast your future bonus with a new employer.
Commissions: mortgage lenders calculate your income by averaging your commission over the past two years. If you change jobs, it eliminates this history from that employer and the underwriter cannot say with confidence that your commissions will be equivalent.
Part-time and over-time: Much like with bonuses and commissions, the loan officer can average your earnings based on your job history if you are a part-time employee, or if you utilize a lot of over-time pay.
Self-employment: Because many self-employed individuals tend to expense many of their business costs, they are able to minimize their tax obligation to the IRS by showing very little income. While that may seem like a benefit, it also reduces their ability to qualify for a home loan. If you are a business owner and decide to change your company structure from say a sole proprietor to a partnership or a LLC for example, buy the house first.
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