Preparing to take the biggest test of your life, you study extra hard and get a good night’s sleep before the big day. Preparing for a job interview, you research the employer and you show up on the big day at least 10 minutes early. By the same token, when preparing to take out a mortgage for what might be the biggest purchase of your life, there are certain things you do, like collecting work and bank statements, and certain things you don’t, which we discuss below:

1. Don’t Lose, Quit or Change Jobs

To a loan Underwriter, a job signals consistency, continuity and predictability. What lenders don’t like are surprises. Once you leave that safe space and cross the line into unemployment, you’re deemed less reliable and stable.

So, if you have any thoughts about changing jobs, even for a better, higher-paying one, you better sit tight and bite the bullet until you’ve moved into your new home.

If you lose your job before you apply for a loan or lose your job during the loan application process, you will have to show your lender that your situation is merely temporary. Whatever you do, don’t try to hide your current job status from your lender. Concealment could be considered loan fraud. Rather, be prepared to provide a letter of explanation for any gaps in employment of 30 days or more.

If you are self-employed, realize upfront that there will be a greater burden on you to show your income stream than there will be on someone working for wages. Moreover, be prepared to document your job income not only by showing tax returns from the last two years, but also bank statements from the past 12 months.

2. Don’t make big credit card purchases

Unless you can keep your balance under 50 percent of your limit, it’s almost never a good idea to put big purchases on your credit card — and when applying for a mortgage loan, you should absolutely never do it.

Lenders closely follow debt-to-income (DTI) formulas, so if a new credit card charge or even a new credit card application upsets that delicate ratio, you will greatly diminish your chance of being approved for a loan.

Winning a loan approval is largely based on your lender’s belief in your ability to repay your loan. Ideally, your lender wants to see that you use credit sparingly and responsibly. To make a large purchase financed by a credit card not only signals a certain recklessness and volatility that lenders abhor, it will throw off your DTI ratios.

Lenders are trained to look for red flags. Untimely, unscheduled and impulsive large purchases, especially when you’re applying for a loan, certainly qualify as such and are likely to ruin your chances of obtaining a loan.

Depending on your total available credit, closing a credit card account with a high credit limit could hurt your credit score, particularly if you have high balances on other cards or loans. If you have zero balances, your credit utilization rate is zero, and won't be impacted by the loss of a balance.

3. (But) Don’t close your current credit card accounts

Closing a credit card, especially one with a high credit limit, can hurt your credit score, particularly if you have high balances on other cards or loans. So, although your intentions may be good – you’re trying to clean up your credit by consolidating the number of credit cards you’re using -- don’t do it. Such a move could make it appear your debt ratio has gone up.

4. Don’t count retirement income as income if you only tap it sporadically

You don’t get to count money stashed away in an IRA because lenders rarely count it. Even if you have a quarter of a million dollars in your retirement account and high FICOs, you can’t tell your lender you’ll randomly tap your account in retirement to help pay your mortgage. If you’re retired, your income from Social Security, pensions, rental income and other validated sources will have to be enough to qualify you for a mortgage.

Again, lenders don’t like “sporadic,” they like steady. For your IRA account to count as income, you would likely have to show verification of regular receipt of drawdown income for two months and verification that the payments will continue for three years.

In other words, even though you could have an excellent credit history and a respectable nest egg tucked away in your IRA or 401(k), you can’t simply tap those accounts, whenever you prefer, to make up for any mortgage shortfall.

If this retirement standard seems unfair, don’t automatically hold your lender accountable. Government agencies, which buy many of the mortgages that lenders make, often insist that lenders look for “regular and continued receipt” of income from retirement funds and to assess whether “the income is expected to continue for at least three years.”

Lenders sometimes are able to expand their guidelines governing retirement accounts. In some cases, agencies that buy loans from lenders, allow lenders to annuitize applicants’ retirement fund assets, converting untapped IRA and 401(k) wealth into “income” that helps them qualify for a mortgage.

5. Don’t move (transfer, withdrawal or deposit) large sums of money

Moving large sums of money, especially when they are inconsistent with your usual financial pattern, will draw extra scrutiny from your lender. Sometimes, such events can’t be helped. If these movements of funds are absolutely necessary, be prepared to explain and document their occurrence.

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Loan applications get denied all the time for all kinds of reasons. Your application could have been incomplete, the appraisal for the home you want to purchase might have come in too low, there could be a mistake on your credit report.

Whatever the reason, your lender will have tell you why your mortgage was denied. Under the Fair Credit Reporting Act (FCRA), if your loan is declined, lenders are required to provide clear reasons for rejecting your loan application.

That said, don’t make a rejection easy for them. Don’t make any sudden or rash decisions regarding your job or credit, be prepared to explain any unusual or inconsistent movement of funds, and don’t expect to make any intermittent drawdowns of your retirement funds.

When applying for a home loan or refinance, remember to value consistency above all else.

Your goal is to show your potential lender that your past behavior truly is a predictor of future performance.

You hear almost every day, especially from millennials and first-time homebuyers, that’s it’s almost impossible to buy a house today.  And while it’s true that wages are struggling to keep up with housing prices, it wasn’t necessarily a picnic for your parents or grandparents either to purchase a house when they were just starting out. While it’s true the average house ran about $25,000 back in 1970, the average salary then was about $6,000 a year. In other words, that house your mom or dad bought then cost roughly 4x their average annual salary.

Now, let’s jump to 2018. Bowing to the ease of using round numbers, let’s say the average household pulls in about $100,000 a year. Those are two people living together who make $50,000 each.

And for argument’s sake, let’s say this couple is seeking to buy a home (okay, a condo in Los Angeles) for about $500,000, or about 5x their annual household income.

Here’s the point: You likely had to scrimp and save to buy a house in 1970, and you will likely have to do the same -- or even save and work a little harder -- in 2018, but buying a house wasn’t impossible then and it isn’t now, if that’s truly your goal.

Level the playing field

In fact, you might be able to level the playing field with the 1970s, if you take advantage of new laws and programs that weren’t available decades ago. Back in the day (the 70s), for example, nearly everyone came up with a 20 percent down payment. Today, you can get away with down payments as little as 3 percent. And there are some programs, like Veterans Administration (VA) loans and others, that offer 100% financing. Indeed, 81 percent of Americans purchase their first home with less than 20 percent down.

So, you would be in good company. While, in an ideal world, it would be nice to come in with a large down payment to reduce the size of your monthly mortgage, it’s good to know, especially in an appreciating market, you may still get your foot in the door if you’re short on cash and unable to make the traditional 20 percent down payment. 

On a $500,000 home that you might have your eye on, a 20 percent down payment would mean you would have to come up with a $100,000 down payment. Coming in at only 3 percent, however, means you would need only $15,000. That’s a big difference — an $85,000 difference!

If you’ve got parents or simply friends who like you enormously, they could donate to your housing cause by making a tax-free gift up to $14,000. Actually, your mom could gift you with $14,000 and your dad could donate the same for a grand total of $28,000. But wait, there’s more. Your significant other’s mom and dad could do the same for another $28,000, bringing your gift total to $56,000. That’s real money.

Of course, not everyone has bankable parents or other reliable parties waiting in the wings to donate to their housing cause, no matter how noble, but, at least, the option is there.

At this point, it’s important to make the following disclaimer: If you come in with less than a 20 percent down payment, many lenders -- who have relationships with Fannie Mae, Freddie Mac and other government agencies and investors to whom they sell their loans to generate cash so they can make more loans -- will require that you have some skin in the game. In other words, your down payment can’t come entirely from a gift.

However, if you come in with more than 20 percent, your entire down payment contribution could come from a gift.

Co-Signers to the rescue

Moving on, you could also ask mom and dad to co-sign the mortgage with you. If they have a solid credit score and assets, your ability to obtain a mortgage would increase significantly. About a quarter of all loan originations on single-family homes occur this way. In Los Angeles, co-borrowers listed on the mortgage or deed of trust recently topped 30 percent. Of course, if you miss a payment, your co-signers’ credit could be dinged, or, worse, if the mortgage payments stop altogether, the lender will come looking for mom and dad or whoever else you persuaded to cosign. 

If there are no family or friends with deep pockets to help you out, reach into your own pockets. Consider pulling from your 401(k) or IRA assets. Some 401(k) plans let you borrow up to the lesser of $50,000 or 50 percent of your 401(k) balance. Raiding your retirement fund might slow your accumulation of retirement assets, so, again, you have to establish your priorities and ask yourself, am I willing to take a hit against my retirement savings to obtain a house now. After all, even though many 401(k) plans require that you pay yourself back, the time your money is absent from your account is time your retirement savings won’t be growing. 

First-time homebuyers (and that usually means you haven’t owned a house in the last three years) can also tap an IRA up to $10,000 without early withdrawal penalties.

Additional help

If none of the above options are available to you, or you just don’t want to go there — meaning you don’t want to hit up your parents or temporarily derail your retirement progress — you might turn to government programs for help. Many federal, state and local programs offer grants or special loans to help you come up with the down payment.

And if you’re planning your marriage, there’s no shame to start a “wedding registry,” where you indicate, not so subtly, that cash is even more welcomed than blenders and bedsheets.

So, if you want a house, you’re going to have to scrape together your nickels and dimes the way previous generations did — and perhaps work even a little harder than they did — but you also have new avenues that didn’t exist a generation ago to help you become a homeowner.

There’s no glossing over all the obstacles, real and imagined, that first-time homebuyers face, but with persistence and a solid plan of attack, you can do it.

Talk to a reputable lender experienced in successfully dealing with a multitude of financial scenarios about your goal to become a homeowner. Also, consult your accountant, tax adviser or mortgage lender for the most current tax rules, laws, strategies and tactics that may apply to your situation.

It doesn’t cost a penny to talk to a knowledgeable knowledge lender, so use your resources.

Lastly remember, if you have the will, you’ll find the way!

Whether you are already a homeowner or thinking about buying your first home, the new tax laws—officially known as the Tax Cuts and Jobs Act (TCJA)—will challenge how you think about your home loans, especially your Home Equity Line of Credit (HELOC).

What Changed

In addition to flatter tax brackets, TCJA eliminates many popular deductions for individual taxpayers, and puts new limits on those that remain. Whether you benefit from these changes. and to what degree, will be a function of where you live, how much debt you currently owe, who makes up your household, the type of debt you have, and how much you make.

To understand exactly how you will be impacted, you will need to work through a projection with a tax professional. Until you do, here is a summary of some of the key home-related changes.

• Mortgage interest remains deductible for most homeowners. The deduction is available on acquisition indebtedness – debt incurred in acquiring, constructing, or substantially improving a qualified residence –  that does not exceed a total of $750,000. The previous cap on total mortgage debt of $1 million remains in effect for existing mortgage holders.

• Property, state income, and local taxes, which had been deductible on your federal return, are now limited to $10,000. This is especially significant for individuals living in states with high income taxes and those in areas with high property taxes.

• Interest on home equity lines of credit, may no longer be tax deductible. This takes effect for tax years beginning after December 31, 2017, and the suspension remains in effect until 2025.

Offsetting the elimination of these deductions is a jump in the standard deduction. For 2018, the standard deduction will rise to $12,000 for individual filers and $24,000 for those who are married and filing jointly. For many households, this boost could more than offset the loss in their itemized deductions and lower their overall federal tax bill, even after their home-related deductions disappear.

But What About Those HELOCs?

Homeowners with home equity-based debt may want to meet with their Loan Officers, as soon as possible. With the Federal Reserve expected to raise the level of interest rates three times this coming year and most HELOCs priced to move up with them, the attractiveness of this type of loan would have diminished even without TCJA. Now without the deduction, HELOCs are likely to be even more expensive to use versus other alternatives.

Chief among the alternatives is a cash out refinance. With long-term mortgage rates still low, this type of borrowing enables HELOC users to retire their home equity loan product and combine the outstanding balance into a larger mortgage. Assuming the new mortgage does not exceed the $750,000 threshold, the interest paid would then qualify for the deduction for those still planning to itemize.

Given the degree to which the standard deduction rose, after meeting with your Loan Officer you should also discuss your circumstances with your tax professional to determine what course of action will lead to the best after-tax outcome for you.

When it comes to buying a new home in retirement, conventional wisdom says most people will downsize from what they currently have and spend less. However, surveys find that 48 percent of respondents plan to spend the same amount or more on a new home. Additionally, 30 percent are looking to purchase a house with more square footage. The reasons why vary and can affect how you work with these clients.

Family Matters

Some of the most popular reasons for upsizing involve family. Many people want to move closer to kids—and grandkids. Additionally, 16 percent of those surveyed have adult children who have returned home. This often means they want more room in anticipation of time spent with extended family.

Aging Parents…and Selves

Others who choose to upsize cite the need to accommodate elderly parents and, possibly, their caregivers. These potential clients generally require larger homes with a certain layout: fewer levels and wider areas for mobility. Homeowners are also considering this type of space as they think about what their own futures might look like.

Entertaining

Retirement often means more free time to get together with friends and family. Thirty-three percent of those surveyed say that having enough room for family and friends to stay during visits and host holidays is a top consideration.

Living the Dream

Still other retirees have waited—and worked—their whole lives to buy their dream home. They see retirement as the perfect opportunity to acquire the lifestyle they have worked so hard to achieve. This may mean being closer to activities, like golf or skiing, and possibly taking advantage of the amenities a planned community offers.

Cost Effective

Clients who decide to upsize generally do so after careful consideration of how it will affect their savings and cash flow. Since many will be living on a fixed income—with minimal earned income—they may need extra help anticipating all the potential maintenance costs associated with the properties and neighborhoods you show them. This may also mean their search could take a little longer, and some added patience, as they get their numbers to work out.  

For those clients who are thinking about upsizing, understanding what they want in their next home—and assuring them of your ability and willingness to work with them until they get it—can make for a rewarding experience for you both.

Saving for a down payment can be less about how much you can afford to put away than about what you spend your money on. Many fees, for instance, are expenses that are easily reduced without compromising your current lifestyle. The fewer you pay, the more cash you’ll have available to add to the down payment cause.

Where to Begin

Here are some ideas for where to find fees that can be negotiated, minimized, or eliminated altogether.

Bank Fees

Ask your personal banker about ways to reduce any fees you are paying on your checking account, particularly if you have been with your bank for a while. Be sure to mention you are saving for a down payment. The more services you use and the more money you have with a bank, the better your negotiating power is regarding fee reduction. Even if you receive a concession on your fees, stay focused on managing your balances. Avoiding fees for overdrafts and bounced checks is quite savings-friendly.

Credit Card Fees

Call your issuer and request a reduction of your annual fee in view of your history of consistent and timely payments. The alternative, which your issuer knows, is to transfer your balances and relationship to a different card issuer offering lower or no-fee accounts. Similarly, if a payment does arrive late, request a reversal. Generally, issuers are accommodative; they want to avoid losing business to a competitor over an occasional late fee.

Claim Rewards

Loyalty adds up. Whether it is at a local store, restaurant group, or major airline, signing up to receive points is a way to get a little more out of each expense. When you are asked to pay a fee to join a program, however, look long and hard at your break-even point, which is where the benefits you would gain exceed the fees you will pay. Programs like Amazon Prime, which offers free shipping that often pays for itself at holiday time, are good examples of this.

Attendance Fees

Many museums and galleries offer regular free admission days. They tend to be more crowded on those days, but this can save your family enough to pay for lunch after a visit. You will also avoid the handling fee often charged for mailing tickets. Becoming a member of a museum you frequent can also save you and your family money since attendance is free and, often, a portion of the membership fee is tax deductible. 

Cutting Other Expenses

Whether it’s your cell phone, Internet, cable, alarm-monitoring company, or satellite radio subscription, monitor your bills and periodically call to ask if they can be lowered. Often, especially if you’ve been a loyal customer—and make timely payments—the company will be able to find an incentive that can be applied to your account.

With every fee or bill that you cut—or incentive you earn—make it a point to match that amount with a deposit to your down payment savings account. The amounts may be small, but you’ll be surprised by how quickly each of these financial victories can add up. 

There is a well-rooted perception that to buy a home, especially your first one, you should keep saving and renting until you can make a 20 percent down payment. Reality is far different and knowing your options may get you through the door to homeownership that much sooner.

Doing More with Less

Black Knight Financial Services reports that 1.5 million borrowers became homeowners in the 12 months ended June 2017 with down payments of less than 10 percent. Most of these loans were conventional, fixed-rate offerings made through the Fannie Mae, Freddie Mac, and FHA loan programs. Because these agencies are now able to accommodate this type of loan, close to 40 percent of all new mortgages are being made with low down payments.

Down payment requirements may differ for condo purchases or new construction.

Weighing the Trade-Off

While it’s possible to get into a home sooner with less money up front, mortgages made with low down payments do come with the added expense of mortgage insurance premiums until that 20 percent equity level is achieved. They also typically result in the borrower paying more interest over the life of the loan, which could make the ultimate cost of the home higher.

However, proceeding with a low down payment might still save you money over the long run. You will no longer be paying rent and may realize tax savings after deductions for your higher interest expense and property taxes. Potential gains in the home’s value can also make the earlier purchase and expenses worthwhile over time. So, it is important to consider how these varying factors may affect your near-term budget as well as the potential for a long-term gain in your net worth. In many cases, your Loan Officer or financial advisor can help you weigh the alternatives.

Next Steps

Going through the preapproval process with a Loan Officer is an effective way to gauge how much home you can buy—and afford—given different down payment scenarios. It will also help you engage the attention of a Real Estate Agent. Having a preapproval letter will ensure they view you as a serious buyer instead of an aspirational browser still building your savings.

When it comes to down payments, in today’s market it isn’t as much about the amount you put down as it is how much you can comfortably afford to owe. Once you know that, homeownership is in reach.

This is it. You’re ready to make the move into homeownership. From all the online searching you’ve done, you know you need to get “pre-something-ed” to prove you are a serious buyer. However, which is it: prequalified or preapproved? Both sound good, but they serve different purposes.

Getting Prequalified

When you ask a Loan Officer to perform a prequalification, you can do it online, by phone, or in person. They’ll ask you to share information, often verbally, on your credit, your income; assets (savings, investments, retirement accounts the amount of equity you have in any real estate you currently own); and the amount of debt you owe.

It’s a conversation that helps establish some financial parameters before you start looking at and making offers on homes by helping you answer two key questions:

• What price range should I be looking in when I start my search?
• Am I ready to do this, or do I need to save more or pay down more debt?

While the process is useful, especially for first time homebuyers, it isn’t rigorous enough to distinguish you from the other attendees at an open house or when you request a showing. The reason is that the letter is based off something akin to a “best guess” by the Loan Officer, it’s not reviewed by an Underwriter, and doesn’t address the question that matters most to sellers, Real Estate Agents, and to you: Can they/we expect to be approved for the type of mortgage needed to buy this home?  To answer that, you need to be preapproved.

Preapprovals Open More Doors

The preapproval process is like a test drive before you submit your application for a mortgage. The Loan Officer and an Underwriter will verify the facts and figures you discuss, along with your credit history. This process can also help pinpoint things you might want to improve—or errors that you’ll want to correct—before entering the formal application review process. Loan Officers will also begin looking for mortgage programs that might apply to your financial situation. The preapproval process is more rigorous than a prequalification and because it is fully underwritten, helps ensure your home buying process with go more smoothly.

In addition to ordering your credit report, Loan Officers may ask for copies of:

• Last year’s W-2s.
• Current pay stubs.
• Brokerage and other savings account statements.
• Your monthly expenses.
• A current mortgage statement and homeowner’s policy (if applicable).

Once you are preapproved, you’ll receive a letter to share with Real Estate Agents and sellers. After you have an offer accepted on a property, you will still need to officially apply for a mortgage. That review process will involve a deeper dive into the information you’ve already provided, as well as into the specifics of the property itself. Fortunately, having a preapproval also means faster service and turn times to get you into your home sooner, so the official mortgage application is likely to be easier than with just a prequalification.

Why Bother Getting Prequalified?

The prequalification process takes very little time or effort on your part. Any cost is typically limited to that of ordering a credit report. When you already have an idea of the area where you want to look and what type of home you can afford, skipping the prequalification step can make sense. Its best use is as a preliminary step for those who need a starting point.

By comparison, for most buyers, a preapproval is a step they shouldn’t skip. Having a letter from a lender that states you are preapproved can be especially helpful in neighborhoods where the existing home inventory is tight…and when the home you are looking at is perfect. Being preapproved makes it easier for the seller to accept your offer over that of a buyer that hasn’t taken this extra step. 

What do dads need? It turns out, they need some space—and not just on Father’s Day, but all year round.

While homes tend to be used for practical reasons, they also meet emotional needs. Studies have found that one’s home environment correlates to an individual’s overall sense of well-being. People destress when they can settle into a space that is their own for a period of time each day. This type of social withdrawal to a place filled with things of personal significance is seen as a healthy coping mechanism. For husbands, and dads in particular, that place tends to be a man cave.

More than an Excuse for a Kegerator

At its core, a man cave isn’t as much an indulgence as it is an investment in Dad’s health. The key, however, is that the man cave be a personal expression of its dweller. It doesn’t matter if it’s part of the garage that has been converted into a workshop, the traditional finished basement with a wet bar and entertainment system, or an outdoor barbeque station with a hammock and weatherproof sound system. The space will be worthwhile if it reflects the man and he finds it relaxing.

The necessary investment can vary widely. It depends on whether a room needs to be renovated or added to the home or if it just requires better lighting, some shelves, and a comfortable chair.

Appealing to Buyers

While it’s hard to put a price on Dad’s health, it may help to know that potential homebuyers do see man caves as appealing. Potential buyers tend to respond well to things that help them see themselves occupying the space. Just as a basketball hoop or swing set helps children imagine living there, having a spot already designated for down time can help a husband or dad bond with a property.

The caveat to this is that it helps if the space is adaptable to future users’ interests. While team loyalties may be an obvious color scheme, when it comes time to sell, Real Estate Agents recommend treating those loyalties similar to personal photos. They should be removed before marketing the home to avoid distracting a fan with different loyalties from appreciating the merits of the room.

Once the man cave is established and the kids are settled into their spaces, it may be time to get to work on a “she shed.” After all, moms need their quiet zones, too.