Whether you’re applying for your first home loan or you’re refinancing your existing loan, it can be overwhelming. Mortgages require a lot of paperwork and present many financial terms that not all borrowers are familiar with. By understanding the common mistakes that we’re going to discuss below, you can better prepare for getting a flawless home loan.
Paying Off Debts Right Before Applying
It’s natural to want to pay off existing debts that you have before applying for the large debt of a mortgage. However, that’s not always the best move to make. Paying off old debt and using a large amount of your savings can have a negative impact on your mortgage application.
It’s very common for a credit score to drop for a short period of time when an old debt is paid off. Instead of paying debts off right before applying, do so about six months before you apply for a home loan.
Don’t Open New Credit Accounts
One of the biggest no-nos that Vaughn Littrell in Denver and many other mortgage brokers will tell you to avoid is opening any new credit accounts. You don’t want any recent inquiries on your credit report when you’re applying for a mortgage. Additionally, a mortgage lender may deny your application because the new credit account drives up your debt to income ratio.
Again, you should stop opening new credit accounts about six months before applying for a home loan.
Most borrowers opt for getting a mortgage loan that lasts 30 years. This is a long period of time, and mortgage lenders want to see that you can hold down a steady job. Most lenders will require that you’ve been employed at the same company for at least two years.
While switching to a new job isn’t going to cause your application to be denied right off the bat, it can be an influencing factor in the lender’s overall decision to approve your home loan.
Not Understanding the Process and Requirements
While you likely want to jump into a mortgage application and get into your new home, you need to prepare first.
Read and learn about the home mortgage process. When you understand the specific processes that you’ll need to go through, it becomes less stressful and gives you some level of control over your loan. You’ll be able to assess different lenders and determine which ones you’re most likely to meet or exceed the requirements for.
Applying with lenders whose requirements you meet can greatly increase your chances of getting approved for a home loan.
Not Shopping Around
Home loans are offered by many different lenders, each with its own lending terms. With a 30-year mortgage, it can pay to shop around for different rates. Just finding a lender that offers you one percent less on your interest rate can end up saving you thousands of dollars on your overall home loan. Take the time to talk with different lenders and assess the rates that you may qualify for.
There are a lot of mistakes that borrowers can make when getting a mortgage. Fortunately, Vaughn Littrell can assist you with applying for your next mortgage to give you the best chance of approval possible.