Many individuals try to apply for a mortgage only to be disappointed when turned down. They don’t know what to do to become qualified for a mortgage loan and aren’t sure where to turn for help. Financial missteps are common, so one or two mistakes shouldn’t derail the process. Avoid taking the following steps and increase the odds of approval.
Moving Money
People often keep too much money in savings rather than using it to invest and lose out on passive income. However, people looking for a mortgage should leave this money in savings. Lenders want to see liquidity when evaluating a potential borrower. Moving money around right before contacting a loan officer can lead to the denial of the mortgage loan because lenders want to ensure the borrower has funds when going to closing. The borrower needs the funds to cover the down payment and closing costs. Furthermore, lenders want to see enough cash to cover at least three months of mortgage payments.
Taking a Leave of Absence
Another thing lenders look for when evaluating borrowers is their willingness to work. It is not wise to take a leave of absence before applying for a mortgage.
The lender may deny the loan until the borrower returns to work and has received multiple paychecks, at which point they may reconsider approving them for a mortgage loan.
Applying for New Credit Lines
Avoid applying for a credit card or asking for a credit limit increase in the six months before applying for a mortgage. While these requests won’t hurt the credit score, lenders pay attention to them. They will hesitate to provide a mortgage because they worry that the borrower will run up debt immediately after securing it.
Avoid Shopping Sprees
People may go overboard when buying a new home. They want new furniture and appliances to go with the new home and rush out to spend a bunch of money. When they do, the lender worries that they have overextended themselves and may deny the loan application. They now have all these items and must figure out what to do with them.
A lender might approve a loan and change their mind right before closing because the borrower is racking up debt. They review the debt-to-income ratio. If it has changed between the date the loan was approved and closing, they can deny it at the last minute.
Switching Jobs
A person might apply for a mortgage and be offered a new job that pays more. It’s most not to take the job, as the lender may decide to refuse the loan. They must go through the approval process again because things have changed. Accepting a promotion or making a lateral move within the company is okay, but moving to a new company should be voided. It’s also not wise to switch careers. Lenders don’t like that either.
Any person who wishes to secure a mortgage loan should speak with a lender to learn what they should and should not do before applying for the loan or once they have been approved. Homebuyers cannot be too careful when working with lenders. Those who take these steps will find their odds of being qualified for a mortgage loan are higher. Learn more today so you can secure a mortgage loan and buy a home without making any missteps.
