Top 5 Most Common Mortgage Mistakes

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Taking out a mortgage loan can be daunting. The loan represents a huge financial commitment, but also a significant personal commitment with loan terms lasting decades. Therefore, the overall process can be an emotional one. This can lead to potential borrowers making mistakes in the application process that can cost them long-term.

Listed below are some of the most common mortgage mistakes borrowers make during the application process.

1. Not Shopping Around

When applying for a mortgage loan, you want to ensure that you are getting the best deal possible. Therefore, it is important that you talk with different lenders and learn what rates and loan amounts they are willing to offer you. Mortgage repayments will be one of your largest monthly expenses. Meeting with different lenders and seeing what they will offer you will help you get the best deal possible.

2. Not Planning

To apply for a mortgage loan and get the loan amount and rates that you want, you need to plan at least 6 months in advance. During that 6-month window, you need to be on top of your finances and practice good credit. Lenders will review your account history, debt, savings, credit card bills, income, etc. over the course of those months. Therefore, it is important that you pay your bills on time and save during those months before your mortgage application.

3. Changing Jobs Right Before Applying

In general, lenders want to see that you have worked at your current job for at least 6 months. Essentially, they want to confirm that you have passed the probationary period at your work before they offer you a mortgage loan. Therefore, you cannot change jobs right before applying for the loan. Doing so will likely lead to the loan being denied by the lender.  

4. Poor Finances

When applying for a mortgage loan, you need to be mindful of your finances. A history of poor credit and finances will weaken your mortgage application and hurt your chances of getting approved for a loan. Missing a bill or rent payment will be received unfavorably and tell your lender that you don’t know how to manage your own money. Additionally, accumulating new debt such as a car loan or significant credit card debt will hurt your chances. Lenders want to trust that you can manage your finances, and therefore handle making monthly mortgage repayments.

5. Not Saving Enough

Most people know that they need to save up enough money for a deposit – 10% for first-time buyers and 20% for second and subsequent buyers. However, there will be additional fees that will add up and you will want to save for. Some of these fees are the stamp duty, solicitor’s fees, and surveyor’s fees. Therefore, when applying, it is important that you have the money saved for a deposit and some extra funds to cover the cost of those fees.

Avoiding these common mistakes will help you navigate the mortgage application process and get the best deal possible.