7 Things To Know Before Applying For A Mortgage
If you don’t have enough money for investment, you can always borrow the money. As long as you know that you can pay the amount back, you can always ask your friends or a financial institution for the money. A mortgage is a home loan that you can apply for if you want to purchase your dream house. However, before you apply for the mortgage, there are 7 things that you need to know:
1. It’s not a Good Idea to take up more debt
If you intend to apply for a mortgage, avoid taking more credit. Make your purchases using cash only and avoid using your credit card. This is because the lender may decline your mortgage application especially if you use more than 43% of your income to pay back your debts. The lender assumes that you are a risky borrower.
2. Pay your Bills on Time
If you have always paid your bills late, you should be prepared to pay a larger down payment. This is because late payments lead to lower credit scores. The lender will use your credit score to determine whether you are a risky or safe borrower. Therefore, make sure that you know your credit score before you apply for a mortgage. If it’s high, you can be more confident in your application.
3. Your Employment History Matters
Before the bank approves your mortgage, they will look through your employment history. This is because they want to make sure that you will be able to pay back what you owe them. The best way for them to do this is to look through your employment history so as to make sure that you have a steady income stream. If you have switched jobs a couple of times, your mortgage application may take a little longer than usual to be approved.
4. Be Careful About What you Spend your Money on
If you recently made a big purchase, you should hold off the mortgage application for a while. If you took out a loan for that purchase, the lender may refuse your mortgage application because they consider you as a risky borrower. On the other hand, if you used cash to make the big purchase, the lender may require you to increase the down payment amount because they assume that you can afford the house.
5. Don’t Apply for a Big Mortgage
Most lenders avoid giving out large mortgage amounts because not everyone can repay them. Before you apply for a mortgage, break down all your monthly expenses. Then, take note of how much money remains. Use a mortgage calculator to find out the appropriate loan amount for your monthly payments. Then, apply for this loan. This is because the lender will also try to find out whether you can afford the loan before they approve it.
6. Banks are Different
Something else that you should know before applying for a mortgage is that banks compete for customers. This means that you can get a good deal on a mortgage if you take the time to learn more about different offers. Furthermore, some banks may be more willing to negotiate with you on the loan repayment terms even if your credit score isn’t that good.
7. The Loan Amount can be altered
If you are lucky enough to get pre-approved for the mortgage, you should know that the stated amount isn’t necessarily the amount that the bank will give you. This is because the lender usually gives you a rough estimate of the amount that you may be allowed to borrow. Therefore, avoid making huge offers on houses. It is wise to make an offer that’s slightly lower than the pre-approved amount.
You should know the above things before you apply for a mortgage. This will increase your chances of a successful loan application. In any case, just make sure that you can pay 20% of the down payment upfront before applying for a mortgage.
