For many first-time homeowners, purchasing a home without a mortgage loan is an impossibility. The average home represents a tremendous investment, and many of us simply lack the financial resources to pay for a house all at once. So, if you’re looking to make the jump from renter to homeowner, getting approved for a mortgage loan should be job one. In the interest of helping your chances for approval, take care to avoid the following missteps.
Having Large Amounts of Credit Card Debt
For a variety of reasons, most Americans are dealing with some level of credit card debt. While some people’s outstanding credit card debt is reasonably manageable, others are contending with a seemingly insurmountable amount of debt. Needless to say, the road to approval can be long and painful for mortgage loan applicants who fall into the latter category. Many lenders are understandably wary of applicants with sizable sums of unpaid credit card debt. After all, if an applicant is struggling to get a handle on their credit debt, how will they be able to stay current with monthly mortgage payments?
So, regardless of how eager you are to get approved for a home loan, it’s strongly recommended that you pay down any outstanding credit card debt before you start submitting applications. This may mean waiting longer than you’d like to secure your first home, but putting forth the time and effort to get credit debt under control will do wonders for your chances of approval. Additionally, once you’ve gotten your debt in order, give your credit score some time to recover before proceeding to submit any loan applications.
Adding to Outstanding Credit Card Debt During the Application Process
In addition to paying down existing credit card debt, try to avoid accruing new credit card debt while the application process is underway. So, if you have cause to make large purchases while a mortgage loan application is under review, do so with cash or request a short-term loan from a friend or family member. While certain emergency purchases simply can’t be avoided, you’d do well to hold off on any big buys until lenders have finished reviewing your application.
Lacking Regular Income
When it comes to first time home buyer tips and advice, having a regular source of income is among the most important pointers you should take to heart. A steady source of income is essential to many mortgage lenders. In the absence of consistent income, how is an applicant going to keep up with their monthly payments? So, unless you’re extremely wealthy, applying for a mortgage loan without gainful employment is liable to be a tough sell. For example, if you’re currently between jobs, wait until you’ve settled into a new position to start submitting mortgage applications.
By the same token, you should avoid quitting your current job while the application process is underway. Unless you have a brand-new job with a comparable salary lined up – and are able to provide proof of this fact – avoid applying for mortgage loans during periods of unemployment. Even if you’re approved for a mortgage loan while unemployed, you’re liable to find keeping up payments to be financially strenuous.
Being Unwilling to Make a Large Down Payment
Many of us are conditioned to spend as little money as possible at any given time. And while there’s certainly nothing wrong with exercising frugality, doing so while making the down payment for a home is unlikely to instill confidence in lenders. Lenders typically encourage applicants to make the largest possible down payments, as this ensures that applicants have equity in the property. Furthermore, the more money you put down, the less you’ll have to pay back in the long run. As such, first-time homebuyers looking to impress lenders should express a willingness to make the largest down payment they can reasonably afford.
Purchasing your first home without a mortgage loan is liable to prove difficult – if not outright impossible. Given the high cost of homeownership, there’s little wonder as to why most first-time homeowners have no choice but to pay for their residences through mortgage loans. Further complicating matters, many loan applicants inadvertently harm their chances of approval, thus hindering the dreams of homeownership. So, if you’re determined to get approved for a mortgage loan in a timely manner, take care to avoid the blunders outlined above.