A house, no matter how basic it is to human survival, is not really one of the most affordable purchases you will make in your life. Some spend years working hard and saving just so they get enough money to purchase their dream home. But a greater number of people, especially those who have more immediate need for a place to stay, take out mortgages to get themselves a home.
Now, getting a home with a mortgage is not really a bad thing. In fact, it’s really helpful since it allows you to enjoy something even before you earn the money to pay for it. But lenders, or those who finance your house, are going to be very particular with your income and repayment capacity. They are going to look at your credit ratings and even your bank accounts just to see that you have enough. After all, they need to make sure that they will be able to get their money back.
Having said that, there are a few things that you should avoid doing if you don’t want to put your mortgage application in jeopardy. We present them here.
Changing jobs around the time of your mortgage application
Given the freedom that it affords, a lot of people are dreaming of owning and earning big from their own businesses. This is not bad per se, but you might want to put off realizing this dream if you are currently applying for a mortgage. You see, a jump from a having a salaried post to being self-employed is equivalent to a jump to uncertainty. There is no assurance that your business is going to do well in the industry that you chose. Remember, risk is always a part of doing business. Not only that, starting a business requires capital, and where do you get the money? Of course, it’s going to be from the funds that are supposed to be dedicated to paying off your debt. If your lender sees that, they will understandably be worried about your capacity to repay in time.
However, an internal job change from one position to another that pays better is going to be good news. This signals the lender that you will have more than what you have presented, and that serves as assurance that you will not end up hiding from them.
Not comparing deals from various lenders
Choosing a lender is like shopping—you should spend time looking for the right offer. Yes, there are regulations on the maximum interest rates but there is surely variability within the allowed range. One lending company might be charging 0.3 percent more than the other, and this already matters a lot if we consider the value of the property.
Always give yourself at least three options. Ask around. Talk to friends who already got their mortgages before you. Do online research. This is the only way to get the most out of your efforts to acquire a home.
Closing unused credit lines
A potential lender might ask for a list of credit lines that are available to you. Some people think that the more credit cards or lines one has, the lesser the chances of mortgage approval. This is not always the case. When you have more credit lines open, the lesser your debt-to-credit ratio will be. The lesser the ratio, the better your image becomes.
But be careful not to open new credit lines just manipulate the value of the ratio. Having a lot of credit lines, especially if they are opened within a short period of time, will reflect badly on your credit score.
If you want know more about this and other financial topics, visit realfx.com.
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