9 Mistakes that Can Ruin Your Chances of Obtaining a Mortgage

Having your own house can be a very special feeling. However, before you reach this milestone, there are a few hurdles that you must cross. Perhaps the biggest obstacle is getting approved for a mortgage.

Many individuals mistakenly believe that if they have a sizable income and money in their bank account, their chances of obtaining a home loan are quite bright. Unfortunately, that’s often not the case. Several factors are considered by lenders before approving a mortgage. If you make enough of the following mistakes, you can kiss that home loan goodbye.

1. Piling up debt: Your debt-to-income ratio, or, in other words, the amount of loan repayment you must make each month, compared to your income, is an important factor that determines mortgage approval. To avoid appearing as a risky borrower, make sure that this proportion is low (well below 43%) before you apply for the loan.
   
   
2. Ignoring Your Credit: Your credit score and report tell lenders about your borrowing and payment habits, and how responsible you are about paying back debt. Thus, if your report is not in good shape, take steps to beef up your score before applying for a loan. A good credit score is anything above 700, and preferably as close to 850 as possible.
   
   
3. Shutting Down a Credit Card Account: Many people believe that closing a credit card account will improve their score. However, in reality, it can cause severe damage. This is because it reduces the amount of credit available to you, thereby increasing your credit utilization ratio – an important determinant of your credit score.
   
   
4. Maxing Out Your Credit Cards: going over your credit card limit, or even coming close to it, can ruin your credit score by increasing your credit utilization ratio. Ideally, this should be below 30% at all times. So, make sure you don’t swipe your card too often.
   
   
5. Not Paying Bills on Time: In the excitement of hunting for your perfect home, don’t forget your other obligations such as paying bills on time. Just one late check submission can ding your score by several points and ruin your chances of getting a mortgage.
   
   
6. Switching Jobs or Launching a New Business: This indicates instability in income which casts a doubt on the ability of the borrower to pay back the loan. Hence, it should be avoided before applying for a home loan.
   
   
7. Becoming a Co-signor: When you co-sign a loan, you become responsible for the payments if your co-borrower defaults on the debt. Thus, to protect your credit score and avoid additional responsibility, avoid co-signing a loan with another.
   
   
8. Marrying a Person with Bad Credit: Couples often buy a house together after tying the knot. However, if your spouse has bad credit, it may destroy your chances of obtaining a mortgage. So, make sure you try to improve his or her credit before you apply.
   
   
9. Making an Expensive Purchase: Spending money on expensive items such as a new car or a vacation can deplete your cash on hand. You’ll need plenty of money for the down payment, insurance, and closing costs when you buy a home, so make sure you avoid big purchases before applying for a mortgage.

There may be cases when even after cutting down on expenses and saving up for months, individuals don’t have enough cash to provide a down payment on a home. For such people, Fund&Grow has a solution. We enable clients with good credit to get $50,000 - $250,000 of unsecured credit at 0% interest. This is available for a period of 6, 12 or 18 months and can be used to put a down payment on a property. So if you need this kind of funding, call us at (800) 996-0270 and let us help you make your home-owning dreams come true.