Taking Out a Mortgage: 4 Things You Shouldn’t Do
Taking out a mortgage is a big deal. To make sure that you get the best possible result, avoid doing these four things before applying for a mortgage.
Are you ready to buy a home or a piece of property? Knowing how to approach taking out a mortgage is essential, as it can make or break your financial future. The last thing you want to do is approach taking out a mortgage the wrong way, and end up in a financial pickle.
4 Things You Shouldn’t Do When Taking Out a Mortgage
Want to make the most out of the mortgage process? Here are four things to avoid during the mortgage process so you can navigate it in the easiest way possible.
Make Major Lifestyle Changes or Big Purchases
An important part of the mortgage qualification process is convincing your mortgage company you’re a qualified candidate capable of paying them back.
You can do this by avoiding making any large purchases or impactful lifestyle decisions during the qualification period. New expenses will make the mortgage provider question whether or not you’ll be able to pay your monthly payments.
By keeping your finances consistent and avoiding big spending or deposits, you can show how reliable you are to the mortgage company.
Commit to an Unfeasible Mortgage
When you apply to take out a mortgage on a new home, your mortgage company will assess your income and outgoings, and check that you meet their mortgage income requirements.
If you do, they will then offer you a deal where you pay back a certain amount each month.
However, it’s important to remember that only you know exactly how much you can afford to spend. If the company offers you a mortgage that you cannot afford, do not try to stretch and meet their offer – you’ll only be putting yourself at risk of late payments and trouble down the line. Renegotiate, or see if a different company can give you a better deal.
This is one area you shouldn’t allow getting out of your control.
Forget Important Paperwork for Your Application
Applying for a mortgage is an expensive process; most lenders ask for 20% of your home’s value upfront, and there are also application and processing fees to consider. There are even more fees if you’re a first-time buyer.
If anyone is helping you pay for your mortgage, you’ll most likely need to write a gift letter to your lender. This mandatory paperwork outlines the personal information of the donor, the amount being gifted, and a summary that states the donor does not expect you to pay them back.
If you forget to include this letter, the mortgage company will most likely assume you owe this person money and may say you’re ineligible for the loan.
If you’re not receiving any donations, just make sure you have all the other paperwork in order. This will show the lender that you’re serious about the mortgage and that you’re reliable.
Have questions about what paperwork is included for a mortgage application? ClearHome Mortgage Solutions can answer all your lending questions.
Take Out Other Loans
The last thing you want to do during the mortgage process is taken out other major loans.
Mortgage companies take note of your overall debt load when applying for a mortgage, so if you have credit card debt, student loan debt, or other things of that nature it’ll make them apprehensive to approve of your application.
When you apply for your loan, the lending company will take note of the overall debt you have, and assess your debt-to-income ratio. If your debt-to-income ratio is too high, you’ll most likely be rejected. So try to delay taking out other loans or credit lines until after you’ve been approved.
Skipping Payments or Paying Them Late
Lenders evaluate your credit score as a risk-assessment tool during the loan application process. If you have a low credit score, the lending company will think you’re a high-risk candidate, so it’s important to try to keep this score as low as possible.
Paying your bills late can drastically decrease your credit score. In fact, in some cases, it even can drop your score by 50 points!
So when applying for a mortgage, avoid missing your payments and do your best to pay them on time.
Paying for a home can be stressful, but taking out a mortgage shouldn’t be. By avoiding these 4 easy mistakes, you can navigate the mortgage lending process in the smoothest way possible.