It is an ambiguous task to buy a home inculcating in it a total chaos as well as excitement. You not only need to have a keen eye all around at the options which are easily available but also select the right ones for you. With low inventory in many markets end ever rising house prices it is always regarded as a challenge to own home.
The entire process requires a lot of time for you to look for affordable and appropriate house location as well as the lender who might be able to approve your loan. Most significant step in the process is to be aware of your own financial status inclusive of your employment, your debt to income ratio and your credit history before jumping yourself into the mesh of loaning process.
Due to the nuances and the complexity of the mortgage loans you may take few wrong steps or commit errors in the home buying process
Few of them include:
- Unable to get pre approved for mortgage
- Negligent towards options with lower interest rate
- Unplanned strategic evaluation of your credit score
- Defaults and late payments or foreclosure
- Without a saving for affording your down payment
- Flexible jobs prior to loan application
- Restricted employment history
- Deficient information about bank details
- Refinancing after sale of home
- Overlooking the need to lock mortgage rates.
In order to improve credit scores and eschew falling a prey to pre qualification problems or to get an alluring mortgage but at reasonable and affordable interest rate ,one must avoid landing into these troubles.
Let’s discuss in detail.
1.Bankruptcy or being foreclosed upon:
Despite having a credit score that minimally satiates your underwriting guidelines ,you must avoid late payments on earlier mortgages. This entity needs to be made sure to avoid disqualification.
- Lock up your interest rates:
It’s imperative to lock up the rate of interest on your mortgag as e it can go up according to the market ratings . It entirely depends upon your active observation and choice to lock or float your mortgage rates.
- Clear refinancing :
You must avoid applying on properties which you are not interested in keeping or desirous of buying or you are listing on the MLS as lenders might not consider it valuable.
- Careful with existing credit reports:
As credit score always have an substantial impact on your financial situation you must keep them updated. Major objectionable accounts like charge offs and collections which are not applicable currently can be removed and credit is reestablished.
- Being vivid about your affordability:
Source of income , employment stability and expenditure must be kept in mind before applying for loan. These are markers of your ability to afford and repay the loan . Therefore financial organization is must .
- Huge expenses or indifferent behavior towards maintenance of credit lines by opening new credit lines and paying excessive charges on them alter your debt to income ratio, which may hold you in bad shape to claim for loan.
- Limited employment history of the borrower,that is servicing in the field for not even consecutive two years isn’t good criteria for lenders to provide loan as it paves the way to risk of defaults.
- Having a completely fulfilling rental history and regularized deliverance of rents which can be documented along-with a sufficient bank balance is a leverage for getting a loan.
- In order to avoid paying off the debt with sale of house ,. Credit history which is generally consisting of minimum three credit lines and dates about two years back is basic .
- Failing to shop with patience and evaluation of different lenders . Just as a lender will verify few fundamentals before lending a loan , borrower must be active and alert in selecting the lender pertaining to his /her needs and mortgage rates variables provided around their location. One must list up first and then the final steps will follow to end up in mutually beneficial agreement.
- You must not forget comparing the loan estimate to the closing disclosure. The lender is responsible to provide you a documented list, three business days prior to your closing date, which enlists the exact costs you are expected to pay at closing including your down payment ,closing costs ,loan details and terms and other important information. This 5 page document is necessary and you should take time to study it so that you are conscious that you are not being charged extra fees called as junk fees by the lender.
- Another mandatory thing is to have home inspection to find major issues with the home and can be taken into consideration to protect the buyer, unless you have a lot of cash to fix up a home and are willing to risk having to pay for unforeseen repairs. In case home inspections have not been covered, then during the closing you might be entitled to pay the entire bill for fixing the damage in the house. It typically ranges between 300 to $500 depending upon the size and location of the property, which is a small price to pay in comparison to the potential costs which you may fall prey into if you skip this step.
Some of the mistakes committed are unintentional and an outcome of unawareness of the mortgage process, from the beginning of planning to purchase a home till your last pay off or closing of the loan .Although these errors seem to be relatively understandable by the borrowers, they can side track your closing and put you in massive troubled waters. Having a detailed conversation with the lender, you select in accordance with your economic status and the norms of the state, is always helpful remedy to abstain from getting your mortgage sabotaged. Further smooth sailing ,while applying for a mortgage can be provided by experienced and trained professionals who may help you fathom the complex process and make you aware of the consequences if a thorough financial planning and organization is left unattended.