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Top 9 Mortgage Mistakes to Avoid

Mistakes mortages

I’ve put together a list of what I feel are the top 9 mortgage mistakes individuals should avoid if planning on financing a new home purchase or refinancing an existing mortgage.

 

Anything on this list should be avoided at all costs to ensure your credit score is as high as possible and that you don’t run into any qualification problems when it comes time to get that sparkling new mortgage. Otherwise you could end up with a higher-than-necessary mortgage rate, or simply get declined!

 

1. While this may be a no-brainer, it still reigns supreme. Avoid: consumer proposal, bankruptcy and foreclosure. Any one could keep you out of the mortgage game for several year for obvious reasons. Also avoid mortgage late payments. Even if your credit score is great, late mortgage payments that don’t even show up on your credit report can disqualify you with many banks and lenders. Makes sense doesn’t it?

 

2. Listing your property on the MLS and then attempting to refinance that same property at the same time. Lenders don’t love the idea of giving you a mortgage on something you don’t actually want, or are trying to get rid of.

 

3. Applying for a mortgage with charge offs and collections, especially rogers, fido or cellular phone collections, on your credit report (many consumers have these, often in error, and they can easily be removed via credit bureau disputes. They crush your credit score!). Regularly review your credit report to ensure there are no surprises long before you begin the mortgage process.

 

Put simply, a low credit score will lead to a much higher mortgage rate, and even disqualification if it drives your monthly mortgage payment high enough.

 

4. Not figuring out how much you can afford well before beginning your property search. You should get pre-qualified and pre-approved before you even start looking at homes. Once you know how much home you can afford based on your salary and assets, you can properly assess the situation. Otherwise you could just be wasting your time and setting yourself up for disappointment.

 

5. Opening new credit cards or making excessive charges on existing credit lines before and during the loan application process. This can hurt your credit score and increase your debt load, which could lead to disqualification. See debt-to-income ratios for more on that. You can buy your new leather couch and big-screen TV once the mortgage is funded and closed.

 

6. Attempting to get a mortgage with less than two years consecutive self-employment in the same occupation or field or working permanent fulltime and not in probation. You must prove to lenders that you will actually continue to make the money you’re currently making to obtain a mortgage.

 

7. Trying to get a mortgage without documented and verifiable down payment. You must have proof of downpayment, lenders like to see your downpayment and closing costs in your posession (bank account, etc) for at least 90 days.

 

Oh, and the money needs to be in your account, not under your mattress.

 

8. Not establishing your credit history. You generally need at least three credit tradelines (that show up on your credit report) with a minimum two-year history on each. Yes, credit is the root of all evil, but also a necessary one in the mortgage world, that is, unless you plan to pay for your expensive house with cash…

 

9. Not dealing with a mortgage broker. Mortgage Brokers are professionals and they have access to more products and more lenders than anyone else. They will help you save thousands while they will only act in your behalf and not their employers.

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