Getting approved for a mortgage can be overwhelming and confusing for home buyers. Oftentimes, they have misconceptions about the process, which can lead to costly mistakes.
For today’s blog post, we chatted with Michael Dean, a branch manager for CrossCountry Mortgage in downtown Orlando, about five mortgage mistakes to avoid.
Whether you’re a first-time home buyer or a home-buying veteran, if you plan to purchase a new house soon, be aware of the common mortgage mistakes listed below.
1. Shop for homes without a pre-approval letter.
Preparation is key! Before you begin your search for a new house, make sure you qualify for a loan by getting a pre-approval. This process is more robust than a pre-qualification; the bank looks at your credit score as well as your income, assets, and employment history. Your debt-to-income (DTI) ratio also plays a role, as it allows you to know exactly what you can afford.
Once the pre-approval process is complete, you’ll receive a written commitment from the lender, which shows sellers that you’re serious about purchasing a home. In a competitive market, a pre-approval letter can give you a big leg up!
2. Wait to apply for a mortgage.
There are many reasons why home buyers wait to begin the mortgage process. If you’ve recently changed jobs, have sizable student loans, or are self-employed, you may not think you qualify for a mortgage. Or maybe you’re concerned about the credit inquiry. Whatever the reason, voice your concerns to your lender and then move forward with their professional help.
3. Make a large purchase without telling your loan officer.
As you get ready to buy a new house, don’t make another big purchase like a car, furniture, or even appliances. In fact, anything that requires monthly payment installments should be put on hold until after your mortgage is finalized. These transactions may lower your credit score, which in turn impacts your interest rate and approved loan amount. If you make this mortgage mistake, you end up with a higher interest rate for the next 15 or 30 years or even a larger down payment.
4. Start a new job.
Steady employment and income is a key piece of mortgage approval. Your lender wants to know that you can make your monthly payments! Thus, it’s important to show that you have a consistent income each month that is expected to continue for the foreseeable future. If a job switch is a must, stick within the same field. A complete career change can lead to problems and should be put on hold until after you’ve closed your mortgage.
5. Take out a personal loan or co-sign a loan.
If you take out a personal loan or co-sign a loan for someone else, you may run into issues. The lender may even turn you down for the mortgage even if you were previously pre-approved. It comes down to how your DTI ratio is affected, but in most cases, it’s not worth the risk.
Let The Urban Dog Group help you with your real estate needs. Contact Christine Elias at caerealestate@gmail.com.