On average, it takes about 45 days to close on a home loan. Before that, you’ll need to research mortgage lenders and loan options, get preapproved, and find your home. That leaves a lot of time for potential mistakes.
If you want to be approved for a mortgage, it’s best to avoid these mistakes. Let’s take a look at the most common mistakes when applying for home loans so you don’t fall victim to one of them.
Making Large Financial Changes
One of the most common home loan application mistakes is making large purchases or applying for new credit. Once you submit your home loan application, do not make any financial changes.
These means don’t apply for new credit, but also don’t close old credit accounts or pay off large amounts of debt. In addition, put off large purchases until after closing.
Many lenders check their applicants’ credit before closing. If they see a change that they deem negative, your final application can be denied.
Ignoring Their Employment Situation
Many mortgage lenders prefer that you have at least two years of steady employment at the same job. This helps show that you are stable and will be able to pay off the loan. However, sometimes people switch jobs right before trying to buy a home.
A higher-paying job, better commute, or other benefits could be helpful, but it can also make the home loan application process more difficult. In a similar way, quitting your job during the home buying process can also be detrimental.
People who are self-employed may also have difficulties applying for a home loan. If you’re self-employed but make a steady income, you might think you can apply for a mortgage like everyone else.
Unfortunately, it can be more difficult to get a home loan when you’re self-employed. You may want to consider applying for a home loan for self employed people. These types of loans take your employment situation into consideration.
Not Understanding the Process
The process of applying for home loans is complicated. There are a lot of different steps and terms to know. Plus, making a mistake can lead to huge consequences.
Because of this, you should make sure to learn as much as you can about the process. Your realtor and mortgage lender can help walk you through the process and give you home loan application tips. A home loan application guide can also be helpful in learning more.
Not Financially Preparing
At least a few months before you plan to apply, you should check your credit. Some people have mistakes on their credit reports that could affect a mortgage decision. In addition, you can work to fix your credit, which could save you money on fees and interest rates.
Make sure you also set aside a solid amount of savings. Most people realize you’ll need to pay cash for the down payment. However, you may also need to pay title insurance, taxes, origination fees, and other costs at closing.
Plus, many new homeowners need to make repairs and changes to their homes in the first year. Building up your emergency fund can prevent unneeded stress if you suddenly need to pay for a new furnace, for example.
Avoid These Mistakes When Applying for Home Loans
Applying for a home loan is a complicated and long process. Because of this, some people make common, but avoidable mistakes.
If you know what to avoid, you can make applying for home loans easier and less stressful.
For more helpful personal finance tips, check out our other articles.
