Getting a mortgage is a natural progression as you move on in life. Whether you needed it for a personal use or business reasons, it can often be a stressful and intimidating process. There are a wide range of factors that you need to take into account when applying for a mortgage. With all of this noise causing distraction, the last thing you want to do is lose sight of the fundamental factors that influence whether or not the mortgage lender accepts your application and for what interest rate.
While mortgage lenders have started to increase the numbers of mortgages they accept, there are still many strict controls and checks in place to assess the risk level of each applicant. A lot of these measures and checks are relatively new, introduced after the recent subprime mortgage crisis. They tend to be extremely selective as to who they will extend credit to, which means that you have to be well prepared when you go into your meeting with the mortgage lender.
People constantly make the same type of mistakes when they are applying for a mortgage. This is why it can be useful to utilise the services of a reputable mortgage broker, as they can help you sift through all of the technical jargon and fine print in order to find the best mortgage for you. Here are a few more tips on what to avoid when applying for a mortgage.
Possessing a weak credit score
When someone lends out their hard earned money, they always want to have it returned eventually. No matter if you were lending to a good friend or you are a bank giving a mortgage, they are not going to give someone a significant loan if they have doubts about the person’s ability to pay them back.
Unlike being friends with someone, banks do not know whether or not you are trustworthy enough to pay them back in entirety. Therefore, they have to look at your financial records when it comes to your dealings with debt. If you have a poor credit score, the lender may decide that it is too risky and will not approve your mortgage. Your credit score may be bad, but acceptable. In this case, you will receive a higher rate of interest on the mortgage.
The goal is to have your score as optimal as possible. This means making sure that all repayments in your daily life are paid on time and you don’t forget to pay bills on time etc.
Having a lot of debt
Some people barely use debt at all in their day to day lives, while other people use credit cards and payment programmes for everything from their shopping to their cars. If a person has a large appetite for risk, the lender will be less keen to lend them money as they may feel that the person has a lot of different creditors to repay and that they may struggle to meet payments consistently every month.