How to Secure a Mortgage Successfully
Insider Tips for Homebuyers
Buying a home is a significant investment, and securing a mortgage is an essential part of the process. Whether you're buying your first home or returning to the market to purchase another one, there is a lot of preparation to ensure your mortgage application is approved. To avoid unnecessary stress, wasted time and financial loss, it is crucial to understand and avoid the common mistakes that are often made when applying for a mortgage. Read on discover what they are and how to avoid them.
- Do not change job or career: stability is key when it comes to securing a mortgage. Your emplyement and income are major factors in calculating your mortgage. Changing jobs before closing can impact your eligibility and delay or cancel your mortgage approval. It maybe hard to turn down a great job opportunity, but you should keep in mind that in order to apply for a mortgage, banks will want permanent employment for several months. Self-employed, at least 2 years. If a job opportunity is presented, make sure to consult with your lender first.
- Don't buy a car, boat, RV or furniture: surprising as it may sound, it could cost you your dream home. Lenders evaluate your financial information up until your closing date. Making any big purchases or taking on new debt can impact your credit score and debt-to-income ratio, potentially affecting your eligibility for a mortgage. Avoid adding debt before closing and postpone making these purchases until after you closed your loan. If you must take out credit or make a large purchase before you close, make sure to consult with your lender first.
- Do not excessively use credit cards: taking on significant new debt shortly before or during the mortgage application process can raise red flags for lenders. It may indicate financial instability and potentially impact your ability to purchase. Making large purchases on credit will also impact your debt-to-income ratio, potentially affecting your eligibility for a mortgage.
- Do not apply for or close lines of credit: you should avoid making financial decisions that impact your credit. What impacts your credit? Applying for new lines of credit, even if you don't use it and closing out old credit accounts. If possible, keep credit accounts open to build and establish credit history.
- Do not co-sign a loan: being a cosigner might seem like a generous gesture, but it comes with risks. Co-signing loans, leases or other financial obligations for others will impact your debt-to-income ratio, typically resulting in a lower credit score and potentially affect your eligibility for a mortgage.
- Do not omit debts or provide mis-information on your loan application: The more information you provide about your financial situation, such as debts and non-wage income, the more accurate your loan estimate will be. Failure to do so may require adjustments to your budget and potentially affecting your eligibility for a mortgage, leading to delays, financial loss and possibly your dream home.
- Do not make large bank deposits including undocumented cash: document any funds deposited and used for the down payment. Avoid making any undocumented cash deposits. Federal mortgage guidelines prevent money laundering through real estate transactions and require all cash deposits to be documented or sourced. This includes gifted funds, selling assets or funds taken from retirement accounts.
- Budget for closing costs and prepaid items: not budgeting accordingly could cost you. Best practices, ask your lender, attorney, realtor and movers for fees you may incur during your home buying journey and create a budget. In addition to closing costs (ie: appraisal, escrow, insurance, points, taxes, title search, attorney) and prepaids (ie: appraisal, inspections, loan origination fee, earnest money, taxes, HOA, oil, propane), include moving costs (ie: supplies, storage, movers) and ongoing or overlooked expenses (ie: utilities, maintenance, repairs, insurance, HOA) to your budget. Tip, work towards having 3-6 months of living expenses in an emergency fund, even after close.
Bottom line, plan at least 6-12 months in advance and consult with a lender immediately. They will help you better understand your credit and take actions to improve your credit score if needed. Lastly, transparency, stability and wise financial decisions are key as you navigate the path towards homeownership.
For lender recommendations or real estate advice, please email PropertyGalCT@gmail.com or call 203-733-1613.
Lisa Brown-McDonald, REALTOR® at The Brokerage of New England Realty. Buy, Sell, Build, Dream, Inspire. For home staging and decor inspiration, follow me.
Disclosure: I am licensed Connecticut Real Estate Agent and have based the information presented on personal experience and information received from industry professionals. You should consult with a mortgage lender before you rely on this information. The information contained in this article provided contains no guarantees of completeness, accuracy, usefulness or timeliness and without any warranties of any kind whatsoever, expressed or implied. As an Amazon influencer, I earn from qualifying purchases. Under no circumstances shall company or it's affiliates, partners, suppliers or licensors be liable for any indirect, incidental, consequential, special or exemplary damages arising out of or in connection with this article and any third party content and services.
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