Mortgage DO’s and DON’Ts
Pro Tips by Kristi Sauter
Buying a home is a big step, arguably for most people, it is their largest investment. It doesn’t have to feel overwhelming, but there are some things you should avoid to make sure the mortgage process goes smoothly.
When you are shopping for a mortgage it’s safe to say that during that time purchasing any other major assets isn’t a great idea. Now isn’t the time to be acquiring things like RVs, boats, or new cars. These can have a negative impact on your *Credit Score and your *Total Debt Service Ratio.
It’s also not the best idea to take on any additional forms of debt, such as lines of credit or credit cards, or book any major vacations. You don’t want it to appear like your ability to repay the loan has changed at any point during the application process.
If you have money in multiple different accounts or spread amongst various institutions, it’s frowned upon to start reallocating those funds. When doing so, it becomes increasingly difficult for the credit adjudicators to assess your asset situation.
Another thing to try to avoid is a job change. Employment stability is one of the ways that your ability to repay the loan is evaluated. Job uncertainty can make the financial institutions feel like there might be a chance that you will struggle to repay the debt and therefore make you a higher risk to loan too.
First things first – get preapproved. This will help you have a greater understanding of what you can afford, and you can start budgeting.
Check your credit report. This can be important because from time to time there can be falsely reported items that can impact your ability to borrow. You will want to clear those up to avoid any further complications in the future.
Now is the time to pay down as much consumer debt as possible. It’s always a good idea to start with the most expensive debt, typically those reside with credit cards and pay them down, so you aren’t fully leveraged. If financial institutions see that you have maxed out your credit cards and haven’t been diligent in paying them down or paying them off, they will be reluctant to loan you more money.
Buying a home is a huge commitment and there are a few things you can do to make sure you put yourself in the best possible position so that when your dream home comes on the market your finances are in order. If you have more questions, or you’re thinking of purchasing a home, make sure to meet with a Mortgage Expert to see what you can afford, and to make sure you are in the best possible position from a borrowing standpoint to purchase a new home.
*Credit Score - A credit score is a numerical expression based on a level analysis of a person's credit files, to represent the creditworthiness of an individual. A credit score is primarily based on a credit report, information typically sourced from credit bureaus.
*Total Debt Service Ratio – Is the percentage of gross annual income required to cover all other debts and loans in addition to the cost of servicing the property and the mortgage (principal, interest, taxes, heat, etc.)