The excitement of purchasing a new home can sometimes cause buyers to rush through the mortgage application process. Organization and planning is an essential part of the application process. It is important to understand that certain mistakes can slow down the road to settlement.
RISMedia published a comprehensive guide to the mortgage application process when buyers are under a home purchase agreement.
1. No Preapproval
Before even starting your home search, make sure you apply for a preapproval. This gives buyers an idea of how much they can afford in terms of a mortgage. As well as what kind of mortgage (FHA, Conventional) they qualify for.
2. Changes in Credit Behavior
Overusing credit can have a severely negative impact on your credit score and mortgage approval. Opening and closing credit cards, overspending and applying for new credit along with the mortgage application can raise a red flag in the process. According to RISMedia, these behaviors can affect both your FICO credit score and credit utilization ratio.
3. Skipping blank pages
In mortgage application paperwork, there are often blank pages included. Those pages are intentionally left blank and should not be thrown away or left out when sending signed paperwork to your lender. This omission can certainly hold up the process or even worse invalidate your application.
4. Skipping over the fine print
Purchasing a home could be the biggest investment of your life. Don’t become lazy when it comes to going through mortgage paperwork. Although it could be time consuming and tedious, reading the fine print will ensure that you understand the terms and conditions. Being thorough also gives buyers the opportunity to ask any their lender any questions that may arise.
This is an absolute no, no. Exaggerating and lying about income, assets or employment on a mortgage application can put you at significant risk for mortgage fraud. Honestly is always the best policy, especially when it comes to mortgages. This mistake comes with huge consequences that you definitely want to avoid.
6. Not updating your records
This is a perfect time to get your records in order and verify credit scores, employment history and assets. The information of all of these items will be required for the mortgage application. It is better to be organized in advance versus waiting until the last minute.