Mortgage 101: Don’t Make These 6 Mistakes On Your Mortgage Application
Making Sure That You Get the Mortgage You’re After
Although the process might seem daunting to many first-time homebuyers, the information in this article should go a long way towards making the mortgage application process smooth sailing for anyone. Applying for a mortgage is actually a lot like applying for college: make just a few key mistakes, and you could be “out of the game.” Here are six of the most common pitfalls that people make when applying for a mortgage – and how to avoid them!
1. Bad Credit
It simply cannot be understated: the health of your credit score is extremely important and greatly affects your mortgage application chances. The first thing to do when you’re looking at buying a home is to clean up your credit score as quickly and thoroughly as possible. Start by ordering a copy of your credit history report, and take the time to assess the financial information contained in it. Be sure to check the report for any errors. If you find any, alert your credit card company, loan representative, or other personnel in charge of the offending accounts. Although it may seem like a hassle to pore over all of the details, the effort will definitely pay off in the long run.
2. Foregoing Government Programs
It is possible that one of several government (federal or municipal) programs might be a good fit for you, but these types of programs are often overlooked, despite the fact that they can be helpful for those who have glaring issues in their credit score history, such as a declaration of bankruptcy or even a foreclosure. Contact your local housing agencies in order to find out more about the various government programs available to you.
3. Borrowing Too Much
Here’s another potential pitfall that too many first-time homebuyers fall into: borrowing more than they can repay. Doing so only sets one up for potential failure and unnecessary stress later in life, and may also affect mortgage rates. On top of the home loan, it is important to consider other additional expenses that come along with owning your own home, including mortgage insurance, property insurance, and taxes. Given these seemingly hidden additional fees, borrowing a larger chunk of money up front loses its appeal pretty quickly. Do your best to aim for a mortgage that you can repay in twenty or thirty years, with a fixed interest rate that’s as low as possible.
4. Disorganized Financial History
When you’re getting ready to start the mortgage application process, make sure you have an efficient and easily accessible filing system to organize all of your pertinent financial statements. This includes any and all bank statements, financial papers pertaining to savings and retirement accounts, pay stubs, and more. By staying organized, you will feel more secure in your financial life. As a result, when you go to apply for a mortgage, all of your information will be organized and ready to present to the loan officer.
5. Moving Money Around
During the mortgage application process your loan officer will have to confirm your income and assets listed on the paperwork, so it’s key that you avoid moving money around from account to account. Similarly, don’t even think about taking out a large loan for something like a car – you will want to wait until the entire process of buying your home is finished before doing anything like that. If you must make a large transfer of money between accounts consider speaking with your mortgage broker first, and always make sure you have the transfer documented in its entirety. Moving funds around will slow down the entire process (which no one wants) and could result in unnecessary problems with your mortgage.
6. Putting Credit Scores In Jeopardy
Along with tracking and double-checking your credit history, it is also important to add any other sources of credit to your existing report. Make sure to keep your credit score in good standing so that your mortgage broker and lending institution trust your viability as a borrower and prospective homeowner. This includes talking to your loan officer or mortgage broker before paying off huge credit card debt during the mortgage loan application process.
Make Sure to Ask Questions About the Mortgage Process
The mortgage application process can be confusing and overwhelming, with forests of paperwork that include directions in extremely fine print. Don’t let that deter you from pursuing your dream of buying a home. though! It is important to ask questions of your mortgage broker and your real estate agent as they come up during the process so that you feel as confident as possible. Good luck buying your first home!
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