Common Mistakes People Make When Getting a Mortgage
Buying a property can be an overwhelming experience; many times, people get confused with complicated paperwork and end up making the wrong choices. It is crucial to understand that your mortgage is the most significant debt you will ever carry. Don’t make it more costly than it has to be. One of the most critical steps in the home buying method is deciding out financing. There are thousands of questions often asked about mortgages and the mortgage process.
One topic that we feel doesn’t get discussed enough when it comes to home financing is the common mortgage mistakes. The reality is, there is someone out there right now making a mistake that is going to stop them from buying their dream home. People need to be well informed and educated before making such big decisions and avoid mortgage mistakes. Luckily, you can avoid all of these mistakes if you know what to look for. Here, we present you with the lens you need to spot these common mistakes before making them. That way, you won’t be that first-time homeowner looking back and saying, “If I only knew then.”
Here are a couple of common mistakes you should steer clear of.
1. Not getting a pre-approval
One of the common mistakes customers make is not getting pre-approved for a mortgage before home shopping or, worse, putting an offer on a home. Now and then, clients call in and say that they want to put an offer in on a home but are not approved. As a result, they end up not qualifying due to income or unsatisfactory credit scores. Such occasions can lead to an increase in the expected interest rate on the mortgage. Also, it can increase the down payment required on the mortgage. Thirdly, they can end up paying unforeseen lender fees, extra lawyer fees and a brokerage fee if the mortgagee being used doesn’t pay the mortgage broker commissions for the work done on your file. When you find your dream house, please don’t waste time getting pre-approved by an accredited mortgage agent.
2. Not disclosing your source of income
Second mistake, not disclosing exactly how you earn your income. When you go for a mortgage, the lender will go through your finances to determine if you’re a good candidate for a loan. This includes checking a lot of personal information, including your assets, salary, credit history, and employment. Without these essential details, it would be difficult for the lender to evaluate your default risk or your probability of missing a payment, or worse, being seized. If you’re employed, many times, an employment letter and a pay stub will be enough. However, if you get paid hourly, you will have to submit a two-year history. This will apply to any variable income like commission and bonus income. If you’re self-employed or own a business, there are several ways to verify this income. A conversation will be needed to fully explain your income and make sure you can provide the appropriate documents.
3. Not disclosing credit history
The third common mistake is not disclosing your credit history or score misinformation. Your history matters every time you borrow money. It helps the lenders to decide how creditworthy you are. If you have good credit, that’s excellent. You’ll get favorable rates and terms on your mortgage. Lenders consider credit scores from 661 to 850, either Good or Excellent. A score lesser than that compromises your leverage when discussing mortgage terms. Therefore, disclosing your credit history is very important as the credit history is your gatekeeper to which lending institutions will consider looking at your mortgage request. This can be determined if you can get the mortgage completed with a 5% down payment of the purchase price or do you need 35% for a down payment.
4. Providing incorrect information
The fourth mistake is not disclosing exactly how the down payment is being accumulated. This is very important for the lenders as they have audits they have to adhere to with legal authorities. Secondly, if you fail to submit the details that your money has been saved and borrowed, this can lower the mortgage amount you can be accepted for as the lender has to factor in a monthly repayment amount. Apart from that, disclosing the type and use of the purchase property is important as well, as it can influence the type of financing you can obtain. The interest rate may vary for commercial and residential properties since both of them have different rates. Other factors like the year and location of the property might affect the interest rate too.
To avoid these and other mistakes, reach out to Ted Evans, a Mortgage and Insurance Agent Licensed in Mississauga, ON at TLC Financial.
I am an independent mortgage and insurance agent specializing in helping clients in sourcing the right financial solution to improve their family financial position. I’ve been a full-time mortgage agent for 17 years, building a successful mortgage consulting business, by providing unbiased information and helping individuals, families and companies find the right mortgage solution. Through my practice, I found the need to get an insurance license to help clients protect their income earning capabilities and build wealth to leave a legacy behind.
To learn more about the services that I provide, please click here or get in touch with me by clicking here.