Getting a mortgage is not easy, but it can become far more difficult than it needs to be due to some mistakes that mortgage applicants make. Here are the 10 major mistakes to avoid, and you avoid these with some planning and discretion in managing your finances.
1. Not Checking Your Credit Records
Check your credit history at least six months before you intend to apply. This includes checking your credit scores including the FairIssac score.
2. Applying For Credit Just Before You Apply For A Mortgage
Lenders will consider you to be a greater risk if you apply for new credit just before or while you are applying for a mortgage. Your credit score might drop causing you to either not be approved or approved for a higher interest rate.
3. Failure To Consider The Total Housing Costs
Your mortgage payment includes principal and interest, but taxes and insurance costs are added. All of these costs figure into the percentage formula used to qualify your income for mortgage repayment. Divide the mortgage payment by your gross income and the result should be around 25%.
4. Not Having Assets In Your Account For At Least Two Months
Lenders will want to see assets that you have accumulated and not used for living expenses. Don’t borrow from a relative days before applying. You can be sure that the underwriter will find this transfer.
5. Changing Jobs Frequently
Lenders look for stable employment and a job history in your field. Underwriters are wary of applicants who have gaps in their job history and fail to stay in one job or one field.
6. Not Getting A Pre-Approval
There is no substitute for good preparation when you want a mortgage. Make sure you can qualify for a mortgage before you even begin to look at homes. A pre-approval is better than a pre-qualification because it is based on a more thorough review of your financial status. Realtors will be more willing to work with you when you have been pre-approved.
7. Not Shopping For The Best Mortgage
Don’t let a pre-approval confine your mortgage search to that lender. A broker can shop your pre-approval at a number of lenders. You will want not only the best interest rate bit also the best terms and the lowest fees. Knowing closing costs in advance is essential.
8. Spending Time And Energy Looking At Unconventional And Complex Mortgages
Go with a mortgage that you can understand. Avoid paying interest only or adjustable rate mortgages. A fixed rate, fixed long-term mortgage is the best.
9. Forgetting To Lock-in Your Mortgage Rate
Mortgage interest rates can change daily. If you find an interest rate you like, then lock it. This means that the rate will be good for the number of days it is locked for. Always get the locked rate in writing,
10. Neglecting To Read The Mortgage Documents
Even though it may be a chore, take the time to read and understand the mortgage documents. This is time and energy well spent.