Common Mistakes People Make When Qualifying For A Mortgage
A home purchase is one of the most significant financial decisions one can make in their lifetime. It’s, therefore, imperative to take your time and be prepared for the actual mortgage process.
The reason you should start early before buying a home is to avoid committing avoidable mistakes that can have a negative impact on your mortgage application. With that said, the mortgage expert at Nancy Tychowski Mortgage Consultant has listed some common errors people make when qualifying for a mortgage and what they should do to avoid future complications.
By looking over these mistakes, you’ll be able to identify potential pitfalls and get on the right path to homeownership.
1. Having too much debt
Credit card debt is on the rise, and overuse of lines of credit can put you at risk for debt overload. Large purchases can push your total debt servicing ratio over the limit (how much you owe versus how much you earn), making it impossible to receive financing. Some homeowners have so much consumer debt that they aren’t even able to refinance their homes to consolidate that debt. Before you start considering a new home, make sure your current debt is under control.
2. Not checking credit history
When it comes to borrowing money, your credit history will play a significant role, as this will help the lender determine your creditworthiness. Those with good credit will receive favorable rates and terms on their mortgage, whereas a low score will compromise these aspects. Regardless of your credit score or history, you need to be honest about this information so that the lender considers your mortgage request.
3. Not enough down payment
If you’re getting a mortgage, one of the worst mistakes you can make is not putting down a large enough down payment. Although common culture says a 20% down payment is standard, the reality is most people don’t put 20% down on a home. It’s good to save at least 20% of the total house price to avoid paying private mortgage insurance.
4. Insufficient assets or income
Lenders look at your work, investment, and other income before they approve your loan to ensure that you can make the minimum monthly loan payments.
With some loans, such as home loans, lenders are required by law to calculate your ability to repay. Your loan application can be declined if a lender doesn’t think you can afford to repay the loan, either because you don’t earn enough or because the lender can’t verify your income with the information you provided.
5. Inadequate employment history
As employment is one of the most decisive factors that determine whether or not you qualify for a mortgage, it is important not to change employers if you are in the middle of the approval process. Banks prefer to see a long tenure with your employer, as it indicates financial stability. It is best to wait for any major career changes until after your mortgage has been approved and you have the keys to your new home!
To avoid these and other mistakes, reach out to the expert at Nancy Tychowski Mortgage Consultant. With over fifteen years of experience in the mortgage industry, I am passionate and persistent about providing the highest quality services to my clients. I assist customers in finding the right mortgage products that will complement their needs. My mortgage services are available to clients across Chilliwack, Coquitlam, Mission, Kelowna, Kamloops, Burnaby, Richmond, Victoria, Nanaimo, Abbotsford, Surrey, Langley, West Vancouver, North Vancouver, Vancouver, and the surrounding areas of British Columbia.
Get in touch with me today!