When shopping for a mortgage loan there are a number of mistakes homeowners
make. These mistakes can be costly and the best way to avoid making them is to
educate yourself on the process. Here is all you need to know before refinancing
your mortgage.
If you are in the market for a new mortgage there are a number of steps you
can take to avoid making mistakes that can cost you a lot of money. Protecting
your credit should be your first priority while shopping for a mortgage. As a
smart homeowner, you need to research mortgage lenders and compare their
offers.
Mistakes can damage your credit and affect the interest rate you are able to
qualify for. Here is how to avoid making three common credit mistakes prior to
shopping for a mortgage.
Make Your Payments On Time
Even people with good credit ratings occasionally make late payments. If you
are applying for a mortgage you need to have a good payment history on your
record. Mortgage lenders use your prior repayment history to gauge how much of
risk you are for lending.
If you have late payments on your credit history you can still be approved
for your mortgage; however, the interest rate you pay and the terms you receive
may not be as good as if you did not have late payments. Before you start
shopping for a mortgage it is important to have at least six months of on-time
payments on your credit record.
Do Not Allow Lenders to Access Your Credit While Shopping
A mistake many homeowners make is allowing multiple mortgage lenders to
access their credit records. When you shop for a mortgage loan you need to shop
smartly. Always request “no obligation quotes” from the mortgage lenders you are
considering. By requesting a no obligation quote from a mortgage lender you will
need to proved an accurate assessment of the state of your credit. You will need
to request credit reports from the three credit agencies. Do not overstate your
income or credit; this may result in the lender changing the terms of your loan
or denying your application.
Hold off on Major Purchases or New Credit Accounts
When shopping for a mortgage it is essential to have a low debt-to-income
ratio. Opening new credit accounts while applying for a mortgage is a mistake.
Purchases on credit like automobiles or household appliances will lower your
credit score. Your credit score directly impacts the interest rate lenders are
willing to give you on a mortgage. Before mortgage shopping it is best to pay
down the balances on your credit cards and close cards you are not using.
