Common First Time Home Buyer "Slip Ups"

Buying a home is an important decision, as both the financial and emotional stakes are high.  The reward, however, makes the efforts worthwhile. In the US, approximately three-quarters of homes are purchased using a mortgage. Given that proportion, it is unfortunate that many mortgage applicants make small mistakes that prevent them from turning their dream of homeownership into a reality. There are several first time home buyer programs in Texas, but an potential buyer needs to go by the rules and stay away from some common mistakes to be eligible for the home mortgage.

 

Mistakes First-Time Home Buyers Make That Ruin Mortgage Approval:

 

Quitting the Job

It is obvious that an individual shouldn’t quit their job when the loan application is in the process. However buyers, especially first-time home buyers, commonly make this mistake.  Usually this is the result of being offered a new job at a higher salary. The reason this could ruin a mortgage approval is that a lender needs to ensure the applicant has a stable job and is capable of paying bills on time. New employment during the processing of home loan application “starts the clock over” on job stability, and most lenders/guidelines require a 2 year history to be deemed as “stable”! There are exceptions, such as when the new employment position is almost identical to the old, a contract is present, etc.   It is, therefore, advised that all applicants talk to their loan officer before changing their job mid-mortgage approval.

Buying Big Items on Credit

Mortgage applications typically have a disclosure warning stating that borrowers need to avoid large purchases or applying for new credit until the mortgage process is completed (a.k.a “Funded”). This advice often falls on deaf ears, especially during the holiday season. Black Friday and holiday discounts are tempting, but they could jeopardize the mortgage approval. Many borrowers may not be aware of the fact that the credit report will be refreshed before closing and new credit cards and/or higher credit card balances might increase the debt-to-income ratio, causing loan restructuring or even denial of the mortgage application completely.

Not Being Available to Lender

It is important to be accessible to the mortgage lender throughout the process. A lender might call the borrower many times to ask several questions, before approving the loan. Ensure that you answer the questions, submit paperwork or clarify the doubts quickly prior to final approval. If the borrower goes out of town for some time or is unavailable via phone, it might delay the process and raise red flags about the legitimacy of the borrower.

Choosing a Risky Loan

It is recommended to consult a loan officer or mortgage broker and get details about various mortgage options available to homebuyers, especially if you are a first time home buyer. Some borrowers, for instance, may be tempted by an adjustable rate loan because of the extremely low interest rate, but the rate will undoubtedly increase in the future and could make it hard to make your mortgage payment. Every mortgage plan has pros and cons, therefore, it is advisable for  the borrower to choose a loan that syncs with their financial plan. Borrowers can go for a mortgage with a low down payment and slightly higher rate (more geared toward first time homebuyers, but open to all), a mortgage with a higher down payment and lower rate, pre-pay mortgage insurance premiums, and many other options. Each individual buyer needs to explore the available options and understand the risks attached to each before making a decision.

Conclusion

Buying your first home is one of the most expensive decisions an individual makes in their lifetime. It is, therefore, necessary to be extra careful throughout the process. Proper guidance, market knowledge and an understanding of things to avoid make it easier for an individual to get a home mortgage approved at a low-interest rate and without much difficulty. The Davidson Group assists first-time home buyers to choose the right mortgage plan and get a loan approved. To learn more about how we might help you, get in touch with our finance experts today.


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