Mortgage Application Pitfalls
As with applicants, it is accurate to say that not all mortgage lenders are created equal. In reality, there is fierce competition in the mortgage lending industry, so you must distinguish yourself from other applicants if you want to get the best deal. Many people make very common errors that could reflect poorly on them when applying for a mortgage. However, becoming aware of some of these typical traps can help you keep from making a costly error.
Credit
Obviously, your credit history is one of the most crucial factors when applying for a loan. The kind of loan you can get will depend a lot on whether you have a bad mark or a past-due account on your credit history. Many lenders might be reluctant to make you a loan if you have a bankruptcy on your credit report. You won’t necessarily be unable to get a loan if you file for bankruptcy, though.
Make sure your credit report is accurate and shows that your debts have been paid after bankruptcy. Obtaining a letter from your creditors confirming that you have no unpaid debts is also a good idea. A copy of your debt repayment plan, which demonstrates that you paid off your debts, must be given to the lender if you successfully completed a Chapter 13 bankruptcy plan. When you have fully repaid your debts, a lender is likely to stop considering you a risky borrower. It also applies to any current or past-due debts. Work out a repayment plan with the creditor and get proof that you are currently making your payments on time.
Employment
Many mortgage lenders favor seeing a history of consistent employment. If your employment situation changes, you might be flagged as a risky borrower and receive a poor loan offer or no loan at all. The lender wants to ensure that no future financial difficulties are likely. If you changed jobs before applying for a mortgage loan, you will need to provide evidence of your stability in other ways. Show, for instance, that you switched to a position with higher pay or longer hours. When applying for a loan, the lender will need a copy of any employment contracts you may have signed with your employer.
Relationships
Mortgage companies are not allowed to exclude certain applicants based solely on their marital status, whether they are single, married, or divorced. However, your situation might have a significant impact on your total income potential, which might affect the kind or size of loan you can get approved for. Remember that you might not be eligible for a higher loan amount if you are single or divorced because your loan eligibility will be determined by the ratio of your income to expenses. Provide proof of your ability to make on-time payments if you are required to pay child support. Despite the fact that these payments are viewed as expenses, the lender always values a history of on-time payments.
Purchases
Making too many significant purchases all at once is a common trap that many people fall into. Avoid making any other sizable purchases while applying for a mortgage loan and refrain from opening any new credit lines. Keep in mind that the amount of debt you have and the amount of cash you have in the back will have a direct impact on the amount of loan you can get and the interest rate you will pay. Before purchasing any new furniture or supplies for renovations, hold off until the loan has been secured.
