4 reasons to delay your mortgage application

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If you want to become a homeowner, you probably need one mortgage to make a home purchase possible (unless you magically have a huge pile of cash to hand). But the last thing you want to do is just apply to get rejected for a home loan. If these situations apply to you, it may be worth deferring your mortgage application so that you can deal with it first.

1. Your credit score needs to be edited

You usually need a minimum credit score of 620 to get a mortgage. But some lenders have higher requirements, and the better your score, the more likely you will be approved for a home loan. If your credit score is not as high as you would like it to be, spend some time improving it before you apply for a mortgage. You can do this by paying all of your bills on time and paying off your credit card debt Credit utilization rateand correcting errors in your credit report (e.g., overdue debts that you have actually paid).

2. Your debt-to-income ratio is too high

Your Debt-Income Ratio (DTI) measures your monthly debt in relation to your income. If your DTI is too high, You could be denied a home loan because a lender may think you are already over-indebted. You can lower your DTI by paying off debts or by doing a part-time job to increase your income. Every move is good for your finances and helps you get mortgage approval.

3. You just took a cut at work

Your lender will want to confirm that you will be able to pay your mortgage – and to do this you will need an income that can cover the amount of loan you wish to take out. If your salary has recently been cut and that cut is temporary, it may be better to wait until it is restored before applying for a home loan. Or you can increase your own salary by doing one Second job.

4. You haven’t saved a lot for a down payment

If you are unable to pay a 20% down payment on completion, you may be denied a mortgage. But even if your lender is willing to accept a smaller down payment – and many let you pay 5 to 10% – you will be hit private mortgage insurance (PMI). This is an expensive premium that makes home ownership more expensive. A better bet might be to sit tight, save more, and apply at a later date to avoid PMI.

If you apply for a mortgage when you are not an optimal candidate, you may be denied a loan directly. Or you can get a mortgage approved but get stuck at a higher interest rate than you would like. If these factors apply to you, it may make sense to postpone your mortgage application. That way, you can work on improving your financial condition so that when you buy a home you are better equipped to deal with those costs.

A historic opportunity to potentially save thousands on your mortgage

The chances are good that interest rates will not remain at a low of several decades for much longer. This is why it is important to act today, whether you are looking to refinance and cut your mortgage payment or are ready to pull the trigger when buying a new home.

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