Unfortunately, the mortgage process isn’t always smooth sailing. A lot rests on the outcome of your mortgage. And any one of these minor factors could slow down or put an end to your mortgage process. We’re sharing six common hiccups those seeking home loans face, so you can avoid falling at these hurdles.
Mortgage lenders want to give home loans to reliable applicants. Being able to pay your mortgage off is crucial. A good credit score provides your prospective lender with evidence that you’re able to pay off loans.
Credit Score Issues
Poor credit comes from failing to pay off money owed to you. This borrowed money might be in the form of credit cards, bank loans or another mortgage. Before applying for your home loan, we recommend improving your credit score. Dedicate a few months to paying back the money you owe on time and in full.
No credit score
If you’re young or just becoming financially stable, you might not have a credit score. Although having no credit score is better than having a poor credit score, you’ll also want to dedicate time to amending your credit situation. A simple way to do this is to start using a credit card. Using a credit card for larger purchases and paying it off at the end of every month shows you’re responsible with money. Just make sure you don’t forget!
Having Other Loans or Debt
The majority of us seeking a home loan only have one pot of money to our name. We want this pot to provide payments for our mortgage. Having other loans and debt means more hands in our pot! And a mortgage lender will want their hand to be top priority!
If you have other loans and debt, many lenders will be reluctant to lend to you. Not only does it show you might not be best equipped to handle their money, but it also suggests it will take you longer to pay them back. Before approaching a lender for a home loan, try to pay off any outstanding loans or debt on your record.
Aiming Above Your Budget
We can all be a little optimistic at times. However, when it comes to lending for a home loan, we need to be realistic. Failing to be honest about our finances can lead us into hot water in the long run. But before we even reach this point, our potential lender will consider our budget. If you’re aiming too high above your budget, your lender will likely hold back their offer— they don’t want to lend to someone unable to pay them back! Similarly, if you’re asking for a large home loan but have a small deposit, you’ll likely get turned down. Waiting to save a larger deposit will give you a better chance at receiving a bigger home loan.
Minor Admin Errors
They might be minor, but they can have a big impact on your application! A mortgage lender doesn’t want to have to comb through your application and wait for you to clarify your errors. A minor error will likely have them throwing your application (and hopes of a home loan) out the window! Before submitting your mortgage application, triple check everything is correct.
Approaching the Wrong Lender
Successful mortgage lenders (i.e. the lenders you want to borrow from) will have specific criteria you need to meet. For example, a local lender will only lend to people in the surrounding area. These lenders want to develop a business profile in a certain area. Approaching a local lender for a home loan in a different vicinity is unlikely to be successful. Researching who you want to borrow from and where you want to buy property will save you and your lender time.
If you want to learn more about working with a local mortgage lender versus an online lender, check out this blog post.
These minor issues in mortgage applications happen more often than you might think. However, you can avoid these hiccups by preparing early and researching the home loan process. Before applying for a mortgage, read through this blog post and make sure you’re not in danger of encountering one of these issues.