Securing a mortgage is no easy feat. It’s a time-consuming process that can be frustrating and mentally draining. And once you’ve secured one, it’s a matter of keeping up with the repayments, which if you don’t could cost you your home. If you are planning to apply for a mortgage, make the process a bit more easier and ensure that you do things the right way by avoiding these potential pitfalls.
Disregarding your credit
Before you begin searching for a mortgage, you should first know where your credit stands. After all, a bad credit score could either bump up your mortgage interest rate or become the reason for you to get no approval at all. Check your credit score several months before applying a mortgage. Doing so will allow you to make the necessary fixes to get your credit back on track.
Getting another credit alongside the mortgage
During the mortgage application process, be sure to avoid applying for another type of credit. Keep in mind that whenever you apply new credit, lenders or creditors see you as a risk, thinking that you are deep in debt and you are using credit to keep your finances afloat. Likewise, if you insist on doing this, there is a strong chance that you might not be eligible to receive the approval on the mortgage.
One of the requirements for mortgage eligibility is to have a steady employment and income. Mortgage companies would like to ensure that your monthly income is consistent and sufficient to cover the necessary repayments. If you switch jobs too much before applying for a mortgage, creditors will take it that you don’t have a stable income to support the repayments. A career change could also pose problems on records; so if you are planning to take a new job, do so after you’ve secured the mortgage.
Pre-approval is one of the keys to ensure you’ll get a good mortgage. Mortgage pre-approval is different than pre-qualification because the bank will assess your income, credit, assets and employment to know how much you can afford. With a pre-approval in place, a lender will give you a written commitment which can be a proof to home sellers that you’re in for business and you are serious about making a purchase.
Failing to make comparisons
Even if you get a pre-approval that doesn’t mean you just have to settle with the first mortgage company that offer you financing. Instead, learn to shop around and make comparisons. Doing so will ensure that you’ll be able to get the lowest rate with the best terms.
Not locking the rate
Mortgage rates change regularly and, at times, several times a day. If you obtain mortgage quotes, they will remain just as financial estimates unless you lock the rate in. So if you are satisfied with the rate, inform the lender, bank or broker to lock it in and get things in writing. Once locked and you have the document in hand, you can be assured that your rate is guaranteed for a certain period.
Skipping to read the documents
Don’t forget to read the terms of the mortgage before signing on the dotted line. The process can be troublesome but at the end of the day, understanding all the details in the loan documents is a way to ensure that you won’t be signing up on something that you don’t want or agree with. Also, don’t hesitate to raise your concerns or ask questions. Otherwise, you could sign up on a mortgage whose terms could put you in a serious financial woe.
This financial advice was provided by Ericka, a freelance writer who has written different financial-related articles for a number of websites. She also regularly contributes content for www.financial-wise.co.uk.