A mortgage can help make one of your most significant life purchases a reality. Whether your goal is to buy your own homefinally or to start building your dream house, there are different types of loans to help you achieve your goal.
However, before you can enjoy your mortgage, you’ll need to apply and get qualified first. You can easily make mistakes that can cost you your mortgage if you’re not careful. If you want to secure a home loan, make sure to avoid the following.
Taking in additional debts
Increasing your DTI ratio puts you at risk of failing your mortgage application. Every lender has a different DTI ratio requirement, depending on the time of home loan you are applying for. Make sure to avoid additional and unnecessary debts to increase your chance of securing a mortgage.
Skipping bill payments
Lenders will only approve borrowers who are good payers. If you apply for a construction loan primary residence but your credit score is lower than required, and your history shows you’re always late in paying your debts, you can expect to get a no from them. Before applying, address credit errors, pay bills on time and improve your FICO score.
You will be asked to provide a history of steady employment when applying for a home loan. By changing jobs and your income decreases, it can pose as a problem leading to a rejected mortgage application. If you do plan on changing careers, make sure to secure a steady and higher level of income or to wait until you receive financing before taking in a new position or employment.
Making large bank deposits
It is true that you can use down-payment gifts when applying for a home loan, but there are rules you need to follow. For one, you need to document the large amount properly and indicate to your lender that you received it as a gift. Also, it would be best if you have the amount sitting on your account for more than two months before the application.
Underestimating total expenses
Buying and building a house can be costly, even if you apply for a mortgage. The estimated cost is not the total expenses you need to worry about, so never underestimates the total costs. There could be hidden charges, changes in interest rates, insurance, etc. depending on the type of mortgage loan you plan on getting.
Not shopping for mortgage lenders
Not all lenders are the same. You’ll soon learn that many mortgage lenders offer different rates, terms and conditions, and will vary in mortgage products to provide. Always check credentials, licenses and reviews and to compare prices before working with one.
Securing a loan that is worth the pre-approval amount
Just because your lender tells you you’re qualified for a loan doesn’t mean you should borrow the amount indicated in buying or building your home. What you may fail to realize is that the amount they’ll be telling you is the ceiling amount your lender is willing you to borrow. Make sure to set your budget and find a home that feels right. This way, you’re not putting yourself at risk of being house poor.