3 mortgage mistakes you want to avoid
Applying for a mortgage could be a lot easier than you think. If you're fully employed and have a history of paying off your bills on time, chances are good you'll be approved.
Having said that, there are definitely some mortgage mistakes you'll want to avoid, especially if this is your first time in the market. Here are a few of them:
1. Failing to check your credit report
The credit score found in your credit report serves as a quick means for your lender to establish how responsible you are with finances. While traditionally quite accurate, they're not error-free. In other words, there could be inaccuracies on your report that adversely affect your score. That's why you should make sure to check your report from all three bureaus before applying to ensure everything is as it should be. You can file a complaint if something appears off.
2. Applying for new credit
While there's nothing necessarily wrong with opening a new credit card, doing so shortly before you apply for a mortgage isn't a good idea, financial experts warn. As noted by FICO, taking out additional credit triggers what's known as a hard inquiry. As opposed to a soft inquiry, where you take a look at your credit report, a hard inquiry authorizes the lender to examine your credit because you're looking to obtain additional capital. This process in and of itself causes your score to dip. The impact is usually small, but the difference may be enough to raise your interest rate or trigger a loan denial.
3. Having little money saved
While a steady income stream is important, it's not always sufficient when it comes to purchasing a home. Buying a house often (but not always) requires a down payment, and if you don't have enough to make one, getting a new house might become a bit tougher.
Knowledge is your biggest advocate when you're looking to buy. So long as you're prepared and do your research, the mortgage approval process can be like a walk in the park.