Here are the top tens mistakes to avoid if you’re planning on refinancing your current mortgage or looking to finance a new home.
Anything in this list should be avoided at all costs to ensure your credit score is as high as possible and that you don’t run into any qualification problems when it comes time to get that sparkling new mortgage.
1. Avoid bankruptcy and foreclosure. Either could keep you out of the mortgage game for several years for obvious reasons.
2. Avoid mortgage lates. Even if your credit score is up to snuff, mortgage lates can disqualify you with many banks and lenders. Makes sense doesn’t it?
3. Avoid listing your property on the MLS and then attempting to refinance that same property within a year. Lenders don’t love the idea of giving you a loan on something you don’t actually want.
4. Avoid charge offs and collections, especially medical collections (Almost everyone has one, often in error, and they can easily be removed. They kill your FICO score!)
5. Avoid credit counseling. (This will significantly drop your credit score, and many lenders won’t lend to borrowers who have used these services.)
6. Avoid opening new credit cards or making excessive charges on existing credit lines before and during the loan application process. This can hurt your credit score and increase your debt load, which could lead to disqualification. See debt-to-income ratio for more on that.
7. Avoid attempting to get a mortgage with less than 2 years consecutive employment in the same occupation or field. Prove you will actually continue to make the money you’re currently making and you’ll get a mortgage.
8. Avoid attempting to get a mortgage without documented 12 month housing history. And it can’t be from a family member unless you can provide cancelled checks! Yes, lenders want to know that you paid your rent on time previously.
9. Avoid attempting to get a mortgage without your own verifiable assets that cover at least two months of your proposed mortgage payment, including taxes and insurance. Translation: the money needs to be in your account, not under your mattress.
10. Avoid attempting to get a mortgage without 3 tradelines with a minimum 2 year history on each. Yes, credit is the root of all evil, but also a necessary one (unless you’re paying for your house with cash…)
*The last four on this list pertain especially to first-time homebuyers. Many banks and mortgage companies now offer no-doc loans that don’t require income, assets, or employment. But they’ll still ask for your housing history.
And first-time homebuyers usually always have to verify assets, housing history, employment, and credit depth. Sure, you might find a lender willing to give you a mortgage, but your mortgage rate will be less than desirable!
If you think you’ve got better mortgage no-nos, or feel I could add some to this list, please feel free to contact me and I will add them. The more tips we’ve got, the more money we save people.
