Applying for a mortgage can feel like navigating a complex maze. With numerous steps and considerations, it’s easy to stumble along the way. To help you smoothly traverse this path, we’ve compiled a list of 10 common mistakes to avoid when applying for a mortgage. Whether you’re a first-time buyer or a seasoned property investor, steering clear of these pitfalls can make your journey to homeownership more straightforward and stress-free.
1. Not Checking Your Credit Score:
Your credit score is a cornerstone of your mortgage application. A low score can lead to higher interest rates or even a denial. Before applying, check your credit report for errors and work on improving your score. You can check your score for free here. Alternatively, reach out and we can assist you with taking a look and explain it thoroughly with you.
2. Overlooking Pre-Approval:
Getting pre-approved gives you a clear idea of what you can afford and shows sellers you’re serious. Skipping this step can lead to heartbreak if you fall in love with a home out of your price range. Not only does a pre-approval give you an accurate understanding of what your price range is, it will give you and the seller confidence when placing a strong offer in a competitive market. Please be sure to work with a broker/lender that looks at your paperwork prior to issuing a pre-approval. These are only as good as the information provided.
3. Inaccurate Financial Information:
Mistakes in your financial details can delay or derail your mortgage approval. Ensure all information, from income to debts, is accurate and up-to-date. Circling back to a strong pre-approval. It is important to have all information upfront and to be transparent. Rarely will you get away with misinformation and it could end up costing you money if your application is declined down the road.
4. Ignoring Mortgage Options:
Don’t settle for the first mortgage offer you receive. Explore various lenders and mortgage types to find the best fit for your financial situation. Be sure to work with a mortgage broker who has looked at various options for you. Banks can be a great starting point, however they often can only offer a product from themselves. Work with someone who has the ability to save you time by exploring multiple options for you.
5. Underestimating Additional Costs:
Remember, the mortgage isn’t the only expense. Factor in closing costs, property taxes, and home insurance to avoid unpleasant surprises. Check out this list of additional closing costs to expect.
6. Changing Jobs Mid-Application:
If you are considering a new job within the same industry, this can often be explained. However, it is always best to run the scenario by your mortgage broker/lender prior to committing. Probation, pay structure, pay amounts, and contracts are all considered when assessing your employment security. Even though you may make more money at the new company, lenders may have concerns about stability with an unknown employer.
7. Taking on New Debt:
Avoid major purchases on credit before and during your mortgage application. New debts can affect your debt-to-income ratio, jeopardizing your loan approval. Lenders hold the right to pull credit up until the day of closing prior to disbursing your funds. If a new debt comes into the picture, this could delay or worse put a stop to your mortgage funding. Always discuss with your broker prior to making a purchase to ensure it will be disclosed.
8. Forgetting to Lock in Your Rate:
Interest rates fluctuate. Not locking in your rate can result in higher payments if rates rise before your loan closes. The good news is, if you work with a broker like us, we are always on it for you. We will always lock in your approval rate for up to 120 days. This will protect you if rates increase, and the best part is… if rates decrease, we will be able to lock in the new lower rate. A real win-win situation for you.
9. Ignoring Government Programs:
First-time buyers in London may qualify for government programs offering valuable incentives. Overlooking these can mean missing out on significant savings. Here is a list of our programs available for first-time homebuyers.
10. Not Reading the Fine Print:
Understand all terms and conditions of your mortgage agreement. Overlooking the fine print can lead to unexpected obligations and costs.
Securing a mortgage is a significant step in your homeownership journey. By being aware of these common mistakes and preparing accordingly, you’re setting yourself up for a successful and less stressful mortgage application process. Remember, knowledge is power, especially when it comes to navigating the intricate world of home financing.
We would love the opportunity to assist you along the way. It is never too early to start. Let’s connect and work together to achieve your dream of homeownership!