All traditional home buyers in Milwaukee need to get approved for mortgage before they make their payment. Often times, though, they don’t understand that their own mistakes led to the bank not giving them a loan.
Getting a mortgage tends to be the hardest part of buying a house. All the paperwork and the time consuming processes are overwhelming, and the stress can seem like it’s too much to bear. Even when you have a stable income, many things can go wrong. A lot of the times, home buyers in Milwaukee aren’t even aware that they are making some mistakes that can ruin their chances of getting approved for a loan.
Below are six common ways home buyers in Milwaukee mess up their mortgage approval.
Not Meeting with Enough Mortgage Lenders
According to various sources, most home buyers in Milwaukee meet with only one mortgage lender before trying to get approved for a loan. This is wrong for many reasons. Most importantly, each lender has different interest rates, and who knows what you might be missing out. In fact, for a 30-year mortgage, these rates might vary up to half a percent! This is on average $60 a month, or $7,000 in the first 10 years! To ensure you’re getting the best deal possible, it would be the best if you communicate with at least three lenders before you make a final decision. Don’t forget to look at all the advantages a lender might have, and not just fees. Only then can you make the best choice.
Waiting for Too Long
Many home buyers in Milwaukee don’t want to apply for a mortgage until they are certain they can make a 20% downpayment, so they can avoid paying private mortgage insurance. Private mortgage insurance (PMI) is an additional 0.3% to 1.15% monthly fee that seems like an additional expense. However, at the moment mortgages are at a historical low, and waiting to gather 20% in cash can make you miss affordable mortgage rates. Consider discussing your financial capabilities with your lender, and try to calculate what can be a more affordable option for your specific situation.
Getting Pre-qualified but Not Pre-approved
Mortgage pre-approval and pre-qualification are two entirely different things, even though many people don’t realize it. Pre-qualification means that the bank has overviewed the borrower’s financial capabilities and ensured that they are able to get a loan. To get pre-qualified, you need to provide your lender with all the financial information they might require, but there aren’t any paperwork required. With it, you get an estimation of how big of a loan you can get, but this isn’t a guarantee that you’ll get approved when the time comes.
On the other hand, mortgage pre-approval is a lengthy process that involves bunch of paperwork and in-depth credit check and income verification. An underwriter needs to make a preliminary review of your finances, as well. If all is well, you’ll get a letter of pre-approval, which is a written proof that you’ll be approved a loan of a certain amount. If you want to leave a good first impression on your seller, you need to be pre-approved and not just pre-qualified. In fact, many sellers in Milwaukee don’t care about qualifications and will work with you only if you are pre-approved, to ensure their house will be sold.
Applying for a New Credit
Even if you’re pre-qualified, it isn’t smart to apply for a new line of credit before you purchase a house. All new credit inquiries can lower your score by up to five points! While this doesn’t sound like a lot to most home buyers in line to get a mortgage, it can pile up, especially if you barely managed to get a qualification. Not to mention that a habit of borrowing more money at once won’t leave a good impression on your lender. In fact, the bank might think you are in desperate need to get more money, and people who need finances won’t be able to pay off loans on time.
Moving Your Money Around
As we’ve already mentioned, your finances need to be checked by the underwriter. This includes the money that you’re saving for the down payment. The easiest way to let your lender know you have the cash is to show them the bank statements. Then, the underwriter will check if your finances have stayed the same. Because of this you don’t want to move your money around while you’re waiting to buy a house. Often, home buyers in [market_sity] don’t realize that shifting a large sum of money from one bank account to another is a huge red flag that can ruin your chances of getting your mortgage approved.
Lenders want to make sure you have a steady income. This means at least two years of working at a same position and not having your pay lowered. If you change jobs while you’re waiting for a sale to close means that your income is no longer stable, even if your new working position offers you a higher pay. If you really want to change your jobs, wait until after the house is sold. If for any reason you are forced to change companies, alert your bank right away. If you do it on yourself, sometimes the bank will be satisfied with a written verification of employment to continue with your loan. Anything else can make you seem suspicious, and chances are you won’t be allowed to get your loan.