If you don't have enough cash on hand to buy a home, you'll need to get financing from a local mortgage provider. However, getting approved for a loan is not as simple as applying and waiting for a response. There are some mistakes that can be made that can prevent you from getting a loan that you need to be aware of.
Mistake 1: Not Being Honest About Employment
Part of the process of being approved for a loan is proving that you have the income to help pay for the mortgage. There will be a series of credit checks before and during the mortgage approval process, as well as a background check on your employment history. Unfortunately, the process of moving can involve changing employment, so you need to be honest about your employment history with your mortgage lender. If you plan on switching jobs with your move, tell the mortgage lender. You do not want them calling your current job for employment verification only to discover that you recently left the company or are planning to leave.
Mistakes 2: Making Big Purchases For Your New
Some people get ahead of themselves when it comes to making purchases for their new home. It can cause people to make a lot of unexpected purchases that will show up on your credit report. Your credit utilization may go up unexpectedly, or you may open another line of credit with a home improvement store to get some materials you will need.
As tempting as it may be to take advantage of sales or make purchases, you should not be doing so while your mortgage is being processed. When checking your credit, the mortgage lender will see these changes and flag your mortgage for review. It's possible that they will deny the loan based on your unexpected behavior.
MIstakes 3: Not Lowering Your Debt-To-Income Ratio
One factor that plays a big role in your mortgage approval is your debt-to-income ratio. This represents how much of your income goes towards paying off debts each month. If you currently have medical bills, student loans, or auto payments, it may be best to pay off one or more of these completely before you purchase your home. It will dip into the cash that you have on hand, but if your DTI is above 43%, you will have a problem getting approved for a mortgage.
For more information on getting a mortgage, contact an institution like Unison Bank.