Top 5 Do’s and Don’ts Applying for a Mortgage
Getting ready to purchase a home? Here’s a handy list of what you should – and shouldn’t – do to prepare for one of the biggest financial decisions you can make.
DO:
1. Continue to pay your monthly bills on time.
This includes an existing mortgage payment or rent, car payments, utilities, etc. Lenders review payment history and reward consistency. Why? Because consistency is reliable. Consistency is a safe(r) bet. While a payment that is one day late won’t ding you, just one 30-day late payment will. And missed payments will really kill your status as a solid loan recipient.
2. Keep using credit as you normally do.
Closing accounts can impact your credit negatively. Surprising, but true. Remember that consistency is key (see above!). Banks like normal fiscal patterns. Closing accounts that have been consistently used in the past is typical.
3. Get fully pre-approved.
Not just pre-qualified. Pre-qualification estimates what you can afford. Pre-approval means a lender has designated your loan amount, which means you are a more appealing buyer to a seller.
4. Establish a saving plan.
Having reserve money is definitely an asset from a lender’s point of view. Furthermore, some approvals are contingent on having a reserve fund at the closing of a property.
5. Retain financial documents.
Pay stubs, credit card statements, bank statements, and the like help lenders assess what kind of fiscal risk you are. Current documentation – 90 days or less – is preferred, and often required.
DON’T:
1. Make large purchases that significantly add to your debt.
Lenders look at debt, in particular, debt-to-income ratio. Keep your ratio low; refrain from buying big ticket items, like a new car. This includes holding off on financing the furnishings of your soon-to-be new home. Wait until you qualify and close on your home before you fill it with new furniture.
2. Switch bank accounts.
Lenders will ask for 3-6 months worth of fiscal statements to get a solid picture of your financial history. If you are no longer a member of a financial institution, you may not be able to access past account information, thus delaying the mortgage approval process.
3. Apply for new credit cards.
It’s that debt-to-income ratio coming into play again. New lines of credit will raise the ratio, even if the balance on the new account is 0. The potential for debt (i.e., credit limit on a card) affects the ratio. Additionally, don’t co-sign on a loan for someone else. This, too, registers as potential debt in the eyes of a lender.
4. Change jobs.
Job history, accompanied by pay stubs to prove employment and solvency, is an important consideration for lenders. Lenders like known factors, and consistent employment is a known factor.
5. Do it alone.
With so many mortgages from which to choose, trying to find the right mortgage can be overwhelming. Find an advisor you can trust. The knowledgeable professionals at Aksarben Mortgage have extensive industry experience and have helped 1000s of clients realize their dream of home ownership. Reach out today to Experience Your Good Life.
* Specific loan program availability and requirements may vary. Please get in touch with your mortgage advisor for more information.