Common Mortgage Mistakes Made By Home Buyers
While homeownership comes with responsibilities, so does opting for a mortgage. To ensure borrowers are capable of meeting repayment responsibilities, mortgages are usually lined with rules and regulations to qualify a borrower. If they are unaware of the stipulations of a mortgage, they could make several mistakes that jeopardize their chances of obtaining a mortgage.
These missteps could be related to existing debt, credit history, or even their job, which are crucial deciding factors for the approval or termination of a mortgage application. To help you avoid losing out on the chance to qualify for a mortgage due to avoidable errors, RS Mortgage Solutions has put together a list of the most common mistakes made by home buyers.
1. Adding on too much debt
Too much consumer debt or any other debt can be detrimental to your qualification for a mortgage. Excessive amounts of debt bring down your credit score and reduce your chances of qualifying. An excellent tip to follow when applying for a mortgage is to pay off all existing debts as quickly and consistently as possible. Delayed or missed debt payments will also adversely affect your credit score.
2. Not paying attention to your credit score or credit history
Not only homebuyers, but everyone should focus on their credit history. A credit report will show a pattern of your financial behavior. A weak credit report can compromise a mortgage deal, a car loan, and even your chances of obtaining the best mortgage rates. To ensure your credit score or credit history are impeccable, get yearly credit reports to make sure you are on track, and there are no fraudulent transactions.
3. Changing to different jobs
Lenders usually prefer lending money to you if you have been employed in a similar line of work for at least two to three years. But when you have sporadic employment, it can alter their decision to approve or deny your mortgage application. The best way to avoid this challenge is to maintain job stability when you know you want to apply for a mortgage.
4. Choosing the wrong mortgage product
Whether you are a first-time homebuyer or are in the market for rental properties, it is essential to discuss a five-year plan with your mortgage specialist. The more information you provide to your mortgage specialist, the better the mortgage product they will recommend. Sometimes it is not about the best mortgage rate, but it is about the best mortgage product for your situation. So be aware of what you want in the near future to avoid choosing the wrong mortgage.
5. Not calculating the closing costs
Whenever purchasing a house, you need to remember that it always comes at a cost. These costs could be lawyer fees, appraisals, home inspections, and land-transfer tax (if not discounted) that need to be taken into consideration. Your mortgage specialist can provide you with a rough calculation of these based on the purchase of your home. That way, you don’t apply for a mortgage that covers only the purchase price of the property you plan to buy.
6. Winding up house poor
Before obtaining a mortgage, the question you should be asking yourself is, “how much can I comfortably afford based on my monthly financial obligations?” and not “What can I qualify for?” Remember, once you acquire the house, you should also have enough money to pay for your utility bills, minor repairs, and other basic expenses. As a result, you need to find out whether you can qualify within a reasonable price range that will still allow you to have monthly savings and the flexibility to travel and spend money on the activities you want to engage in.
To avoid these and other mistakes while obtaining a mortgage, reach out to the expert at RS Mortgage Solutions. As a leading mortgage agent in the Durham region, ON, I have around two decades of experience in real estate, investing, mortgage investment, and land development. I am passionate, committed, and here to understand your needs to help you smoothly journey towards homeownership. I offer several mortgage services, including mortgage purchase, mortgage refinancing, alternative lending, renewals or switch mortgages, private mortgage, reverse mortgages, and construction loans.