5 Things to Avoid When Applying for Your First Mortgage

first mortgageBuying a house is one of the biggest and most demanding purchases you could ever make. Apart from being one of the most expensive, mortgage terms are long and the process of securing your first mortgage is grueling.

If moving between homes is officially recognized as one of the most stressful life events, then consider how stressful buying a home and moving is.

To shake off some of that unnecessary stress, we’ve put together a list of five things to avoid when applying for your first mortgage. Read on to avoid common mistakes and to educate yourself on best buying practices.

What to Avoid on Your First Mortgage

1. Getting Additional Loans

Loans stack up, no matter what type you have. When you apply for a loan, whatever institution is approving you will also be able to see how much outstanding debt you have.

Your loans will be compared with your monthly income, greatly affecting what the bank thinks you can handle in a month. And that’s before you start talking about credit scores.

It’s a good idea to avoid taking out any additional loans at the time of your first mortgage application if you want to be approved. Even a business loan or an SBA commercial real estate loan count.

2. Missing Payments or Overlooking Bills

As we mentioned above, there will be a lot of attention on your credit when applying for your mortgage. Missing payments on bills for whatever reason will result in points being deducted from your score.

Points on your credit history are bad enough, considering it takes around seven years for them to disappear. Missing payments close to the time of your mortgage application is worse. Keep a careful eye on your bills.

Research ways to improve your credit score or get fast credit repair before you apply for your mortgage if you can.

3. Using All Your Savings on a Down Payment

The costs of closing on your first home will be expensive. Down payments and mortgage insurance and other closing costs are big financial factors to always keep in mind.

It might seem tempting to use whatever resources you have in your savings account to use for a down payment. This could eliminate the mortgage insurance and knock off a bit of the mortgage price.

But that’s not a safe idea!

What happens if unexpected fees or home costs arise? Don’t set yourself up for foreclosure by emptying your savings during one of the most financially crucial times of your life.

4. Taking Time Off Work

Applying for a mortgage takes dedicated time and energy, and you might consider taking time off work to help.

Because banks will be keeping your credit score on their radar, they’ll likely be looking into your monthly earnings. Missing work or taking time off takes away from the amount of money your paystubs say you make.

Increase your chances of approval by keeping up with work, putting in extra hours if you can.

5. Not Seeking Professional Help

Sometimes the best idea for first-time homebuyers is to avoid dealing directly with the listing agent. Instead, they should seek out the help of professionals like real estate agents, brokers, or lawyers in some cases.

Don’t be afraid to seek out the professionals, and don’t stress over their service fees. Contrarily, they may be able to save you money or avoid a financial pitfall in the process.

Your first mortgage won’t be easy, but with enough foresight and preparation you’ll set yourself up for a happy home-buying process.

Looking for other insightful tips on subjects like money, business, and your career? Check out the Working Home Guide blog today!