Many homebuyers assume that the only challenge they need to overcome when buying a house is choosing from the number of options available in the market. They fail to take the time to learn about the home buying process, especially the mortgage process. Applying for a mortgage is one of the trickiest and most challenging phases of home buying.
Due to the homebuyers' lack of information about the mortgage application process, they commit costly mistakes. Mortgage blunders costs billions of dollars every year. If you are in the market for a new house, you first need to be informed about the most common mistakes that house hunters commit.
Failing To Prepare Their Finances
Failing to prepare your finances can lead to a very costly mortgage blunder. With that said, the first thing you must do before checking out the available properties is to know your current financial status. You have to make sure that your finances are good. Here are a few tips to help you get your finances in order.
- Get an accurate assessment of your financial position. This means getting a copy of your Income and Expenditure worksheet as well as your Assets and Liabilities list.
- Pay off any outstanding debt and remove liabilities from your account. In doing so, you will significantly improve your status and help you put your best foot forward.
- Put your financial documents in order, such as your statement of accounts, proof of income, tax statements, and so on.
- Acquire a copy of your up to date credit report.
Not Getting Pre-Approved
When looking for a new house, you need to get pre-approved first before closing a deal. This will also help you choose the best mortgage program available. With that said, you must make sure that you quality for financing before shopping for a house.
Remember that a pre-approval is better than getting pre-qualified for a mortgage. This is because the bank will check your credit and evaluate your income, employment, and your assets. With pre-approval, you will also get a written contract from the lender to prove to the home sellers that you are serious in buying the house.
Applying For New Credit
Another costly mistake you need to avoid is applying for new credit while your mortgage application is still ongoing. This is because the lender will view you as a greater credit risk. If you apply for a credit card or other form of loan while you are applying for a mortgage, your credit score might be affected, and it might put your eligibility at risk or it might raise your interest rate.
If you are applying for a mortgage, you must make sure that you have a steady income and secure employment. The loan officer who will evaluate your mortgage application will want to know your monthly income and determine whether it is stable and consistent.
With that said, you must avoid changing jobs too much before applying for a mortgage. If a new opportunity in the same field opens up, it won't automatically disqualify you; however, a complete career change might cause problems.