A mortgage is a financial instrument, more specifically, a debt instrument that is employed to raise capital. It’s increasingly used to make real estate purchases without paying the entire purchase price. There is a popular type of mortgage known as the residential mortgage. This mortgage is applied to buy homes by pledging property to the lender in case of default. However, there are some glaring mistakes borrowers make while applying for a mortgage. This article lists some of the common mistakes and elaborates on them.
While applying for a mortgage, it is extremely important to be honest about every minute detail you give. Otherwise, it can lead you to dire consequences and cause several obstacles in the lending process. Here are the most common mistakes made when getting a mortgage:
Not knowing your credit score and FICO score
Your credit performance is measured via the FICO model that gives a numerical score. This score determines at what level your credit health stands. This system adds up your credit history and evaluates the likelihood of you meeting future payments and your level of risk appetite. While you can qualify for a mortgage, you also stand a chance to grab better mortgage rates. All the statistics from the credit report are taken into consideration. Every piece of data carries a specific value and sums up to a single score that reflects the capacity to repay.
No seasoned funds for closing
Considering cash-in-hand and similar cash equivalents to purchase a property is among the most common mistakes made when getting a mortgage. However, this is completely disqualified in the mortgage process. All your stored funds across your account statements for the last 90 days are needed to satisfy the requirement to obtain a mortgage loan. Make sure to be free from undeposited checks.
Not researching the best available loan programs
It’s very important to educate yourself with various loan classifications before deciding on one. It’s advisable to discuss the possibilities with a mortgage advisor about the types of mortgage rates. Consider the adjustments and compromises you need to make to keep a fixed rate mortgage throughout the tenure of the loan.
Not looking for a pre-approved loan for the mortgage loan
You should always seek a loan that fits into your financial capacity. A pre-approved loan provides you the base to maintain your financial ability while applying for a mortgage loan. It’s best to fully rectify your financial documents with your mortgage advisor, including an underwriting review. This gives you immense weightage to win the confidence of the lender and acquire the loan. It also gives you the ability to negotiate better while applying for the loan. A pre-approved loan is also subject to some conditions, and a change in your financial position affects the final loan amount.