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Common Mistakes to Avoid When Applying for a Mortgage
Introduction
You've found your dream home, and you're ready to make an offer. You've been saving up money and have all the funds ready to go. All you need is a mortgage loan. But before you can get pre-approved for a mortgage, there are several things you need to do—and some mistakes that can derail your application process altogether. Here's what not to do when applying for a mortgage:
You don't consider your finances.
When applying for a mortgage, it's important to consider your finances. The lender will want to know that you can afford the monthly payments on the property you're buying and that you have enough money to cover all the expenses of owning a home, including maintenance costs and taxes.
To make sure that your finances are in order before applying for a mortgage:
- Make sure you have enough money saved up to make a down payment on the house. In some cases, this could be as much as 20 percent (or more) of the price of your new home; however, there may be ways to pay less depending on how much equity is built up in your current home or if you take out one loan rather than two loans (e.g., an FHA loan instead of using private mortgage insurance).
- Consider whether or not it’s financially feasible for everyone involved—from yourself and any other people who might be living with/underwriting their financial obligations through this process as well—to pay off their debts before moving forward
You don't know your credit score.
Knowing your credit score is important for several reasons. If you don't know how to check your score, or if you are not sure how it impacts the mortgage process, then I recommend doing some research and getting to know this information before seeking out a loan.
Your credit score will be used as part of the qualification process for any mortgage product that you apply for. This means that having a higher credit score will increase your chances of receiving a lower interest rate on an offer from us or another lender. It is also used when determining whether or not we feel comfortable lending money without additional guarantors like parents or co-signers (which could help reduce risk). A high enough credit rating can even make up for other deficiencies in an applicant's finances such as lower income levels than would typically be expected with mortgages of similar size and duration. To give you some idea how important it is: I've known people who were denied mortgages because their scores were too low!
If there's one thing that can hold back home ownership dreams more than anything else it's poor financial management skills—and no one wants that happening while they're trying so hard just get into their first place! Having said all this though...there are ways around these issues if they're present; read on!
You open new credit accounts.
- Don't open new credit accounts.
- Don't apply for credit cards, store cards or other loans.
- Don't apply for a car loan or other large purchase.
- Do not open a new credit card account.
You pay late or miss payments.
If you’re missing or paying your mortgage late, it can have a big impact on your credit score. If this happens multiple times over a year, the lender may decide not to offer you a mortgage at all.
So what can you do? The best thing to do is pay attention and stay on top of your bills! If something comes up that causes confusion about when payments are due—like if your bank changes their date format—make sure you contact them immediately so they don't think it's an oversight on your part.
You make large purchases with credit.
If you can't pay off your credit card bill in full, it's not going to help your situation if you have a mortgage down the road. If you use a credit card for large purchases and then wind up carrying a balance, even with low interest rates, those costs add up over time. It's much better to have the funds saved up and then use them instead of getting caught in an endless cycle of debt payments.
But what if there aren't any other ways? If you really need to get something now that may not otherwise be available, consider using another type of loan like an installment loan or personal loan (not payday loans) so that once your purchase is complete, there are no lingering debts hanging over your head.
You sell or close stocks, cash in certificates of deposit or other savings accounts.
You sell or close stocks, cash in certificates of deposit or other savings accounts.
The down payment is one of the biggest hurdles to buying a home, and there are a few ways you can overcome it:
- You save money from your job. If you’re planning on staying with the same employer for several years, ask about adding a 401(k) match and automatic contributions. The extra savings could add up quickly!
- You use your savings. If you have some extra cash lying around, consider putting that toward your down payment rather than using it for everyday expenses like groceries or rent (though these are important as well).
You take out more debt, particularly if you have little available credit remaining on credit cards or don't have enough credit history overall.
If you already know your credit score, great! If not, take the time to get it. This is particularly important if you're a first-time home buyer. A poor credit score or thin credit file can make it difficult for some lenders to offer you a mortgage or with higher interest rates than what you'd likely pay otherwise.
Some lenders will consider taking on more debt in lieu of a good credit history. However, keep in mind that if something goes wrong (and things always go wrong) your lender may be reluctant to work with you again in the future because they don't want further difficulty with their other clients and their own bottom line. In other words, just because one lender wants to take on more risk doesn't mean another will follow suit—you might need two loans if you want both types of financing options available during the application process!
It's important to know what mistakes to avoid when applying for a mortgage!
As you prepare to apply for a mortgage, it's important to know what mistakes to avoid. Here are some common ones:
- It's also important to know your credit score before applying for a mortgage. It will affect your interest rate and how much money you'll be able to borrow.
- Consider what other financial obligations you may have that might affect your ability to repay the loan in full (such as child support payments). If these obligations increase or change at any time during the life of the loan, tell us immediately so we can review them and determine whether they could increase our risk of defaulting on our loan.
- Pay on time! The more reliable you are with payments throughout this process, the better chance we'll have at getting approved!
Conclusion
We hope you’re now better equipped to avoid some of the common mistakes that people make when applying for a mortgage. Remember, the best way to make sure your application is accepted is by keeping it simple and knowing what questions to ask before you start. If you follow these tips and take your time with the process, we promise that applying won't be as stressful!