Buying a home and getting mortgage approval include various challenges. And you wouldn’t want anything which can put your home purchase deal at risk, especially if it involves a mortgage. Hence, it’s important to prepare yourself for getting a loan.
Avoid making any of the mistakes mentioned below if you don’t want to deal with a reduced mortgage amount, a high-interest rate on a mortgage, or even worse, rejection of your home loan application – play safe by keeping the following factors in mind. Alpine Credits can help you learn the right approach to easy and quick mortgage approval.
1. Avoid switching or quitting your job
It’s best to keep the idea of switching or quitting your job for later until you qualify for a mortgage loan. Work history and income play a crucial role in mortgage application approval. Lenders make sure that the applicants have sufficient and steady income sources. Therefore, the chances of approval are dependent on the work history.
Generally, the repayment period of home loans is 15 – 30 years. And there are high chances of loan denial if there is the slightest risk of failure in loan amount repayment within the specified time frame. So to qualify for the best mortgage loan deals, ensure a stable job situation.
2. Avoid making any purchases through credit cards
Avoid using your credit card to keep your credit score as high as possible. Home loan approval is dependent on the credit score of the individual. The higher you use your credit, the higher the chances of lowering your credit score. At least 30% of your credit limit should be unused if you look forward to buying a new home on a mortgage.
Moreover, other expenses come with buying a new home, such as home décor expenses, furniture and fittings, etc. You can use your credit limit to meet those expenses conveniently. However, it is best to avoid such expenses until your mortgage application is approved.
3. Avoid changing banks to ensure a good banking history
Mortgage lenders always check the banking history of the applicants during the loan approval process. It is one of the crucial deciding factors for lenders. The lender will likely approve your application if you have a good banking history. Hence, you shouldn’t change your bank, especially during the mortgage loan.
4. Don’t hesitate to provide any information asked by your lender
Your lender will need your financial information, including income, credit purchases, and others, during the approval process of the mortgage application. You may be asked several questions about your financial condition to understand your repayment capability. Answer all the questions asked by the mortgage provider promptly. Present to the point and genuine information.
Ignoring questions from the loan provider can put your mortgage approval at risk. In the worst-case scenario, you could be denied the mortgage, or there could be a delay in the loan process. Be informative and responsive to ensure a smooth flow of the process.
5. Don’t sign-up for any other loan during the mortgage loan approval process
A loan for any other purpose, such as a car loan, may impact your mortgage approval outcome. Also, avoid making yourself available as a co-signer to help your family and friends. Though the liability of repaying the loan wouldn’t be on your shoulders, being a co-signer, you’ll be equally responsible for the loan taken by your family member or friend.
Mortgage lenders hesitate to give loans to individuals involved with some debt, be it for a third party. It could severely impact your chances of qualifying for a home loan with deals and quality rates.
6. Make sure not to miss any debt payments or loan repayments
Late repayments or missing payments for debt also impact the credit score. You should not miss any loan repayments or debt in any scenario. However, you should make it a priority when applying for a mortgage loan. Late or missed payments are a red flag for mortgage providers.
7. Avoid making any large amount of bank deposits
Making large deposits into your account every month won’t be a concern for the lenders, but making massive deposits all of a sudden, especially during the home loan process, may turn out to be a red flag.
Although it’s common to have deposits from friends and family members in the form of financial help for any major expenses like a down payment for buying a home, or a monetary gift, it should be planned out well. It’s best to receive the money before the mortgage approval process starts.
8. Don’t clear old debts during the mortgage approval process
Older debts have less impact on an individual’s credit score as time goes by, so it’s good to clear off all your debts when possible. However, this shouldn’t be done before or during the mortgage approval process.
You can pay off the old debts after the completion of the process. Making a payment for an old debt may refresh the old collections. It will reduce the average age of your account, which will impact your credit score and credit history. Moreover, it may affect your mortgage loan eligibility and approval.
9. Ask questions wherever needed to clear your doubts related to mortgages
Don’t hesitate to ask questions when applying for a mortgage or during approval. You are borrowing a large amount of money, and you have the right to ask questions to the lender if you have any doubts or confusion. Make sure you understand everything related to the mortgage and its approval.
Getting mortgage loan approval is a huge financial step. Thus you’ll need to invest a lot of time preparing yourself for it. Hence, avoid doing anything that could negatively impact your home loan eligibility or credit score.
Even a small mistake could make things challenging for you or delay the approval. There shouldn’t be any red flags for mortgage lenders. Instead, stick to the standard practices and guidelines for home loan approval and credit-building habits.
Also read: 5 Tips for Choosing a Suitable Broker for Your Mortgage