Here are some common mistakes borrowers make and things to avoid! This is a list of things to avoid when you are thinking about buying or refinancing your home.
- Not getting pre-approved for a mortgage
- Failing to check your credit scores before you apply for a mortgage
- Opening new credit cards before or after applying for a mortgage
- Making late mortgage payments or worse, foreclosure/bankruptcy
- Not saving enough for a down payment
- Applying with limited employment history
- Changing jobs prior to loan application
- Forgetting to lock your mortgage rate
- Attempting to refinance after listing your home
Most realtors will make sure you have talked with a loan officer and have an approval before you write an offer, but once in a while it slips through the cracks! Borrowers think they are good to go, maybe they talked to someone and were pre-qualified but no one actually pulled their credit report and put together numbers. You want to make sure you have a mortgage approval before you write an offer.
Check your credit scores – that way you know what to expect. Mortgage scores may be different but at least you have an idea of where you are at.
I see clients opening credit cards – or just applying – right before buying a home. Even worse, they apply after they have applied for a mortgage. We need to document any new loans, so if you get a new credit card, we need to add it to the loan application. Plus the inquiry can lower your credit score and that might affect your interest rate.
Make sure all your payments are on time – late payments can lower your credit score by 80 or more points – that will definitely affect the interest rate you can get and may also mean you can’t get a mortgage. Mortgage lates definitely affect your ability to get a new mortgage. A foreclosure or bankruptcy will also affect when you can get a mortgage.
Make sure you have saved enough money for a down payment. Make sure it’s been in the bank long enough also – we need to see two months of bank statements and will ask about any large deposits. Depending on the type of loan you apply for, you may need to document every deposit. If you have cash deposits, we typically can’t use that money. That may affect how much money you have towards your down payment. Sometimes I have clients tell me they save money at home – we don’t know where that money came from and cash deposits are an issue. If you are saving money at home, put it in the bank at least two months before you apply for a mortgage. If you are worried you will spend it, open a new bank account further away or where it is more difficult for you to get at it!
Employment history is important. We need to document two years of employment – job gaps can affect your ability to get a mortgage. If you switch jobs, it may also affect your ability to get a mortgage. If you go from salary or hourly to commission or self employment, you may not be able to get a new mortgage for up to two years. You need a two year history of self employment or commission income.
Once in a while you will see someone that never locked in their interest rate – normally that may not affect you too much, but if interest rates are changing, it may hurt you! If you have not locked in your rate, make sure you stay in touch with your loan officer so you know what is happening with interest rates!
If you are going to refinance your home – do not list it for sale! When lenders find out that you have listed your home for sale, they usually will make you wait at least six months before you can refinance it. Lenders don’t like seeing that you are trying to sell your home right before they put a mortgage on it.
If you have questions on any of this or if any of these apply to you, talk to your loan officer. It makes your life much easier if your loan officer is aware of your situation. Then they can help you through it! Feel free to call me with questions too! We like to make the process easy, but I know that doesn’t always happen!
Leslie Vanderwerf, NMLS ID#335509, American Mortgage & Equity Consultants, Inc., An Equal Housing Lender, NMLS#150953 – Email – Website
