Most people in the United States view mortgages as the fastest way to own a home when they cannot afford to pay outright. This is because it’s easier to buy a house with a mortgage or house loan, especially in this global recession. However, not all mortgage applications are accepted for good reasons. A 2021 report by MarketWatch showed that in 2020, there was a rise in mortgage application denials compared to 2019. This doesn’t mean that getting mortgages with bad credit is impossible. All you have to do is avoid making some common mistakes.
Mistakes People Make When Applying For a Mortgage
When applying for a house loan, there are certain mistakes you must avoid. These mistakes may be small, but they could ruin your chances of owning a home. As the article progresses, we will highlight some of these mistakes and how they can be avoided or fixed.
Avoid Big Purchases Before Final Mortgage Approval
Focus on your mortgage first. For the record, it is essential to note that mortgage lenders check your credit twice before final approval. This is to ensure that you are qualified and capable of repaying the mortgages. So during this pre-approval period, it’s safe to avoid making expensive purchases that might lower your credit ratings. Even applying for a car loan can affect your approval chances.
Always Pay Your Bills On Time
- Credit ratings are critical criteria mortgage lenders use in reviewing mortgage applications. If your rating is higher, there are higher chances that your mortgage application will be approved.
- Changing your habits towards bill payment is vital to keeping your credit score high and above average. If you are the type who is fond of paying your bills late, you must stop. This prevents lenders from denying your mortgage application because of your chances of making late payments.
Changing Jobs or Becoming Self-Employed
Mortgage lenders are less likely to approve applications from people who recently switched jobs or started a new business. This is because they need more confidence in your ability to pay your mortgage. When you change jobs, you must prove to the lender that you have enough for the monthly repayments after other expenses. As an entrepreneur, you must be able to show positive business growth over a certain period to have a chance of getting your mortgage approved. So before applying for a mortgage, find a stable financial income to give yourself a chance.
As a person trying to own a home, you must be careful when co-signing a mortgage for a friend, family member, or colleague. This is crucial because you are partially responsible for the debt. If the borrower defaults, it will negatively affect your credit rating, lowering your mortgage application approval chances. Also, ensure that you document all huge deposits in your account and have a partner who has a good credit rating history.
Getting a mortgage is easy when you have the right information. To simplify the process even more, consider contacting a mortgage broker like MortgageKey.