Monthly Archives: December 2018

Top 10 Mistakes to Avoid When Trying to Get a Mortgage

Admin 06/12/2018

Realtors will often tell you what you need to do before applying for a mortgage loan. But they often fail to mention what mistakes you need to avoid so that you can get your loan application approved.

Our McAllen realtors at Equity Assets Realty want to make sure that you don’t jeopardize your chances of owning the home of your dreams. Because of that, we want to give you a little guidance on 10 mistakes to avoid before trying to get a mortgage.

What NOT to Do Before Applying for a Mortgage

  1. Don’t miss out on any payments.
  2. You need to make sure that all your loan payments are current, especially your credit cards and car loan(s). Even once your loan has been approved, your lender will take one last look at your credit before finalizing your mortgage. A missed payment, even this late in the process, can end up with your getting denied – costing you time and thousands of dollars.

  3. Do not move your money around from account to account.
  4. The approval of your mortgage loan is based on the current state of your finances. That means that your lender is looking at your bank account up until the moment your mortgage is finalized. If you shift your money around – moving cash from one account to another – this may seem financially unusual to your lender and you will need to provide a detailed account of why you are doing so.

    An inadequate explanation can leave you without a mortgage loan.

    The same goes for moving to a new bank in the middle of applying for a mortgage. Your banking history is a meaningful factor that plays into getting a mortgage loan and changing it can negatively affect your chance of getting an approval.

  5. Avoid buying a big-ticket item like a car.
  6. Your debt-to-credit ratio plays a major role in your ability to get a mortgage loan. Making a big purchase can greatly increase your debt load and lower your credit score, which are both bad news if you are attempting to secure a mortgage.

    This one is one mistake that you absolutely need to avoid.

  7. Don’t open up any more lines of credit or use credit cards.
  8. When you’re buying a new home, you are likely to want to purchase furniture and appliances. While this is certainly an expected expense, you’ll want to avoid opening up a credit line or using a credit card to purchase these household items.

    This will change your credit score and will be seen as a red flag to lenders. Hold back until after your mortgage has been finalized.

  9. Avoid making large deposits into your account.
  10. When you start making large deposits, your lender will be more likely to scrutinize the loan and your finances, which increases the likelihood of being denied. Aside from your recurring paycheck, you need to avoid making large deposits.

    On a related note, it’s recommended that your down payment sit in your account for at least two months. This demonstrates your financial stability.

  11. Do not let anyone run a credit check on you.
  12. Having a company run a credit inquiry can make it appear as if you are trying to make a big purchase and take out more debt. This can have a negative effect on your attempt to secure a home loan.

    Even if you aren’t actually planning on making a purchase or taking out more credit, just avoid having your credit run.

  13. Don’t co-sign on a loan for anyone else.
  14. Co-signing on a loan means that you are financially responsible for that loan should the other party fail to pay up. It also places an unnecessary risk on your credit and financial situation which is something home loan lenders do NOT want.

    Keep your credit and financial situation stable while working through the home purchasing process. While you may want to help a friend or family member, you really need to avoid co-signing for them.

  15. Don’t ignore your other expenses and financial budget.
  16. It can be easy to fall in love with a home and to do everything you possibly can to secure a loan. In fact, your financial situation may be absolutely ideal when it’s on paper. But that doesn’t always account for your standard of living and other expenses.

    Don’t ignore your other financial obligations and your budget as this can really stretch you thin. And once you get that home loan, you will be stuck with a 30-year obligation that needs to be paid.

    Be conservative with how much you are willing to spend when purchasing a home.

  17. Don’t forget to account for all the out-of-pocket expenses of buying a home.
  18. Obtaining a mortgage loan goes way beyond just applying for and securing a lender. You’ll need to have plenty of cash available to afford the down payment, closing costs, and other fees associated with the home purchasing process.

  19. Don’t close a credit card account.
  20. While you may think that closing a credit card account may improve your credit score, this isn’t the best decision to make when trying to get a mortgage. Closing an account can reduce your available credit and increase your debt-to-credit ratio – this can really hurt your chances of getting a loan.

What NOT to Do Before Closing on Your Mortgage Loan

As we’ve mentioned before, your lender is going to check on your financial situation until at least 30 days before finalizing the loan. That means that if you have found a lender and already in the processing of closing out on a home, you’ll want to avoid the following actions during these final steps:

  1. Do not miss out on any loan payments.
  2. Do not quit your job or switch jobs.
  3. Do not ignore any requests from your lender or broker.
  4. Do not take out a payday loan or any other type of small loan.

While this is by no means an exhaustive list, it should provide first-time home buyers with some valuable insight. If you want a little more guidance and support, the expert McAllen realtors at Equity Assets Realty are here for you.

Contact Equity Assets Realty today at 956-994-9455. We have plenty of experience and success in helping individuals find their dream home in the McAllen metro area.

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