Qualifying for a home loan is not easy, and there are several factors that go into the qualification process besides your income and credit score. As much as underwriters would like to see your loan make it to the finish line, it’s their job to evaluate your income and credit score to make sure you’re a qualified borrower. It’s important to avoid some of the common mistakes that many borrowers make when applying for a home loan. Be prepared and try to limit the mistakes listed below to increase your chances for success.
1.) Avoid making large purchases beforehand
To get approved for a home loan or mortgage, your lender needs to extensively analyze and calculate the probability of reimbursement. One way to prove to them that you are a strong candidate is by showing them that you have reasonable spending habits. Consistency in your finances indicates that you are liable for your expenses and that you can be trusted to manage consumerism. Try not to make any sizable purchases such as a new car, boat, or RV. The financial decisions you make before applying for a loan can greatly impact the likelihood of your loan being funded. Generally, it’s recommended to wait on any sizable purchases until after the loan process has closed.
2.) Avoid major lifestyle changes
Quitting your job to start a new career path is a major lifestyle change that could negatively affect your chances of qualifying for a loan. Try to establish longevity with your current employer before applying for a home loan. By showing job security, Underwriters can better determine whether or not you will be able to handle the financial commitment of a mortgage. Bringing a newborn child into your family can create uncertainty as well when applying for a home loan. Children, although a blessing, are a huge financial commitment, which is why timing is so important.
3.) Avoid new credit accounts or credit inquiries
Your credit score is one of the most important factors when applying for a home loan. Resist the urge of opening new credit accounts with your local retail stores or bank. It might be tempting to save 15 percent on your new TV by opening up a credit card, but doing so could be the difference between you getting an affordable mortgage rate or not.
4.) Avoid closing any credit accounts
Closing a credit account might intuitively seem like it will help your credit score, but will in fact hurt your credit score. Instead of closing out any credit accounts, it’s recommended to continue to make your monthly payments at an amount that’s higher than the minimum due. When applying for a home loan, focus on maintaining consistent credit card payments, and try not to make any big purchases in the six months leading up to your home loan application.
5.) Avoid taking on the financial responsibility of others
When you co-sign on a loan and assume the financial responsibility for someone else, underwriters will question whether or not you can sustain a new monthly mortgage payment. Co-signing on a loan to support your family member or friend means that you’re liable if the worst should happen and they can’t pay off their own financial commitment.
Here at MonsterLoans we understand that life happens and sometimes financial setbacks can’t be prevented. Try to control what you can to better your chances of achieving the American dream of homeownership. As always, if you have any questions, or are interested in refinancing your home, call us to speak to one of our trained loan professionals so that we can provide you with our top-rated customer service.