Ask the Expert

Arkansas Democrat-Gazette home buying illustration.
Arkansas Democrat-Gazette home buying illustration.

I am ready to start shopping for a house. I was wondering if there were some things, financially speaking, that I should avoid doing during this time period.

"Yes, there are several things that you should not do before buying a house," says Carol Parham, vice president and mortgage loan officer with IberiaBank Mortgage Co. in Little Rock.

• Do not apply for new credit.

"As you know, your credit rating is a very important piece of the financing puzzle," Parham says. "Your credit score will have an impact on loan approval, as well as your interest rate."

"Inquiries on your credit report will lower your score and complicate the process," she explains, adding that making all payments on time is a key element to having a good credit score.

Parham says that many of her customers think it is a good idea to close credit card accounts, but in reality, this will also have a negative impact on a credit score.

• Be cautious with large deposits.

"Another key piece of the puzzle for lenders is the verification of your funds for closing," she says, adding that potential house buyers should not make large deposits without keeping a paper trail.

"For example, an acceptable source of funds for closing is 'gift money' from a relative," she explains, adding that the relative signs a gift letter, provided by the lender, which states the dollar amount. Parham says that in her experience, she has found the easiest method is for the funds to be provided with a cashier's check made payable to the recipient as well as the title company.

"This helps us from having to be too intrusive with the person giving the gift," she explains.

• Avoid employment changes.

"Do not change jobs during the process," Parham says. "More specifically, do not change from being a salaried employee to a job with commissions."

Typically, commission income will need a two-year history and then is averaged; otherwise the lender will only be able to use base pay for qualification, she explains.

In conclusion, Parham advises that those who are ready to buy a house should begin by starting with a mortgage lender even before beginning to search for a house. The advantage to do so? A mortgage lender can pre-qualify potential buyers and provide them with an idea of how much money will be needed for the down payment and closing costs.

"In many cases, having a pre-qualification letter from a lender can assist you when making your offer," Parham says. "Your real estate agent will indicate to the seller that you have been pre-qualified and the sellers will likely accept your offer before one from a buyer that has not already arranged for their mortgage."

"There is a lot of misinformation that it is almost impossible in today's market to get a mortgage," Parham says in conclusion. "This could not be further from the truth. Hopefully, some of the information that I've provided can help make the process a little smoother and stress-free."

-- Linda S. Haymes

Do you have a decorating or remodeling question? We'll get you an answer from an authority. Send your question to Linda S. Haymes, Arkansas Democrat-Gazette, P.O. Box 2221, Little Rock, Ark. 72203 or email:

[email protected]

HomeStyle on 08/22/2015

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