The housing market is flooded with great deals and mortgage interest rates are at all time lows; But if you're one of the many looking to get a piece of the latest housings deals, you'll need to be prepared to prove you're a solid mortgage candidate. Because of the dramatic rise in mortgage delinquencies in the past years, lenders have had to really tighten their belts and scrutinize every applicable due to Fannie Mae's Loan Quality Initiative that went into effect June 1st.
The Loan Quality Initiative requires lenders to keep track of any "changes in borrower circumstances" between the receipt of the mortgage application and closing. During this time frame, any fluctuation in the applicant's financial situation will raise red flags and possibly ruin the chances of closing.
Read on to learn 3 most common mistakes mortgage applicants make when trying to acquire a loan to ensure you avoid these slipups.
Applying for New Debt (Credit Cards and Auto Loans)
Think twice before taking on new debt. Sure, it may be tempting to apply for your favorite store's credit offer and save 20% on your purchase, but this small savings can derail your mortgage application process.
Mortgage professionals are now required to check your credit before closing, so applying for a new credit card or loan while your mortgage application is being processed may result in major approval delays.
Racking Up Excessive Debt
Another big mistake buyers make is accumulating excess credit card debt while in the middle of being approved for a home loan. Although you may be eager to shop and start purchasing fancy to furniture to fill your new home with, fight the urge.
Charging up credit cards with thousands of dollars worth of items, whether it be goodies for your new home, or a vacation, is a surefire way to derail a closing. If the ratio of debt payments to income is too high, you, the borrower, could be turned down for a mortgage.
Changing Jobs & Pay Change
A change in jobs and or a change in the way you're compensated for your work could possibly muck up your chances of getting that mortgage.
Lenders need to see a solid history of employment and income. If you just recently started a job in a new field and industry or if you switched from a steady salaried position to one where primary income comes from contracts or bonuses, lenders may have a hard time classifying you as a good candidate for a home loan. The more stable your position and your income, the more likely you'll be approved for that loan.
Although it's a bit tougher to qualify for a mortgage, it's not impossible. Work closely with your mortgage professional to learn more about the mortgage product that best fits your current financial situation.