8 Common Mistakes When Getting Approved for a Mortgage, Kenna Real Estate helps you avoid mistakes -

Get a Mortgage

Getting a mortgage is a big responsibility and likely the biggest financial one you will make. It can help your dream home be more attainable. Still, it can also be challenging, especially if you are going through the pre-approval process with so many documents to provide and being buried in paperwork. If you don’t know enough about the process, you might find yourself making common mistakes that could impact your ability to get a mortgage or favorable rates, when what you really need to do is learn how to improve your home loan approval odds.

Not Doing Your Research Before Becoming a Cosigner

You might think other decisions unrelated to buying a home are separate from your mortgage application. Still, the truth is many financial decisions can determine whether you will be approved or not. Even becoming a cosigner on a student loan can make it more challenging to get a mortgage. You might find it hard to tell your student you need to wait before deciding whether to sign for them, but if you don’t do things right, you might find you can’t get the mortgage you are looking for. You can look at a guide with more information on everything you need.

Not Shopping Around

As you assess property value, you must understand that mortgages look very different from one lender to the next, with other terms, products, and rates across the board. You will likely find a variety of qualification requirements, which means you will want to compare the options across several different lenders. Getting other quotes could save a few thousand dollars across the loan. Don’t forget to check with the bank you usually do business with as well because you might be able to get some loyalty discounts by being a current client. You could also look at online lenders because they usually have lower overhead costs, and these savings may be passed along to you.

Ready to find your dream home in Colorado?
Let us help you. Call or Text Kenna Real Estate Group at 303-955-4220 to get personalized assistance from our expert real estate agents. Find out what your home is worth in today's market.

Not Understanding Pre-Approval vs. Pre-Qualification

You might have seen advertisements for lenders offering pre-qualification within a few minutes of applying. Even though this is true, it means little to be prequalified since it differs from preapproved. Today, sellers are looking for preapproved buyers.

Being prequalified only has a few requirements since you only need to offer estimates of assets, debt, and income, which is something anyone can change. Since there is no guarantee these numbers are accurate, the final result also means little. Preapproved requires much documentation to be submitted, and credit checks are run. When going through the mortgage pre-approval process, it's essential to understand all the necessary steps. For those unsure where to begin, the detailed guide on applying for a mortgage loan can be invaluable. By educating yourself upfront, you'll minimize potential hurdles and increase your chances of smooth approval.

Not Setting Your Budget

Having a pre-approval for a certain amount of money is different from being able to afford those payments. Allowing this number to be your housing budget can lead to becoming house-poor, which means you will have more houses than you can afford. Being pre-approved means this is the highest amount you can get from the lender. You should avoid borrowing this much. Instead, create your budget by playing around with prices using mortgage calculators. This can help you make a monthly payment that works with your current lifestyle. Combine this number with your down payment to determine the total price tag you can afford. This should be your maximum, and you should only look at houses within this range.

Not Keeping Track of Closing Fees

Many people only look at the total price of the house and their down payment, but closing costs can affect how much you can afford. You can expect to spend between 2 and 5 percent of the total purchase price in closing fees, which you must pay upfront instead of putting on the mortgage. These costs usually consist of origination fees, the home inspection, credit report expenses, and the appraisal. You might need to pay some money upfront, depending on your mortgage type. You can negotiate some of these costs, but you can unlikely avoid paying them.

Not Checking Your Credit Report

Your credit score plays a significant role in whether or not you get approved for a mortgage, so before you try getting preapproved, you will want to ensure you have a good score. When you have a higher score, you will get better terms and interest rates, so it pays to ensure you pay your bills on time before trying to get preapproved. A credit report can help determine whether you are in an excellent place to start applying for a loan. When you have your report, check it regularly for errors.

Changing Your Job Before or During the Process

It makes sense career-wise to get a job at a different company, but when it comes to buying a house, changing your job right around this time can stop you from getting a better deal regarding rates. Your employment history plays a significant role, and while having a higher income can be helpful, it will help you the most if you have been in the same position for at least six months.

Forgetting Mortgage Insurance

A mortgage protection insurance policy can help your family continue to make the mortgage payments, even if you pass away before it is paid off. You can also get policies that protect you if you lose your job or are disabled after an accident. You can apply for this type of insurance after you are approved, but applying for a mortgage can be tedious, so it’s a good idea to use this a few weeks before your mortgage is disbursed. This can give the company issuing the policy enough time to get it in place, so coverage starts as soon as you have received your mortgage payment.