There are several mistakes homebuyers make that put their mortgage in jeopardy leading up to closing or in some cases make them miss out altogether on a loan. Here are some ways to avoid those costly mistakes.
Credit cards and financing
A big blunder before finalizing a loan is making an expensive purchase on credit such as financing a car or charging big-ticket items on credit cards.
Lenders do a final credit inquiry check before closing a loan, and new debts can jeopardize the approval process.
Borrowers might also be tempted to put more purchases on credit cards as they try to save money for a down payment.
Lenders consider how much someone owes against their credit limit. If a credit card is nearly maxed out, it can significantly reduce a credit score.
Get multiple quotes
Another error homebuyers often make is failing to shop around for their mortgage. A 2018 study by Freddie Mac found that potential borrowers save an average of $1,500 over the life of a 30-year fixed-rate loan by getting just one additional rate quote when shopping for a mortgage.
Eighty percent of the borrowers who obtained five quotes saved up to $3,904, according to the report.
Check rates at your current bank, but also look at online mortgage lenders, credit unions and maybe even a mortgage broker. Compare personalized rate quotes from at least three to five companies to ensure you’re getting the best deal.
Don’t change jobs
Demonstrating consistent employment is essential to getting a loan. Changing jobs before closing on a mortgage can cause issues, especially if a borrower goes from salary to commission or completely changes job fields.
The rule of thumb is to have at least two years with the same employer before applying for a loan.
Get pre-approved
Before you start house hunting, it’s crucial to get a mortgage preapproval. The preapproval process involves applying with a lender who will check your income, credit history and assets.
After verifying these documents, a lender can tell you what price range you will qualify for on a mortgage loan. This will let you know how much house you can afford before you start shopping.
Don’t assume 20% down payment
Many first-time homebuyers assume they need a 20% down payment. Waiting to buy a new home until you have 20% down can push a home buying timeline out by years. And the longer you wait to buy, the more likely you’ll be shopping at higher home prices.
Loans available with low or even no down payment include:
• 0% down VA loan (available to qualified military and veteran borrowers)
• 0% down USDA loan (available in select rural and suburban areas)
• 3.5% down FHA loan
• 5-10% down conventional mortgage
For contact information on reliable mortgage lenders, banks, credit unions and other home professionals in the Chattanooga area visit the membership directory at www.HBAGC.net.