Buyers may not realize that mistakes in their mortgage application can prove extremely costly, and in some cases even jeopardize their chances of the deal going through.
“Most buyers are so preoccupied with simply saving up for a down payment and getting their foot in the door that they forget about the little details that can trip [them] up,” said Michele Harrington, COO of First Team Real Estate, in an interview with The Mortgage Reports.
Some of the most common mistakes people make include financing a car or another expensive item just before closing. For example, buyers may get financing to buy new furniture and appliances for their home before their mortgage has been approved. This runs counter to the advice of financial experts, who say it could reduce their overall credit rating before the mortgage lender makes its final checks.
“All of these activities are a big no-no, as lenders will do a final credit inquiry check before closing,” Jim Roberts, president of True North Mortgage, told The Mortgage Reports. “If new debts were added, it could jeopardize the loan approval.”
Another often repeated mistake is maxing out a credit card. Most home loan lenders will consider how much an applicant owes relative to their credit limit. So, if a borrower owes $2,000 on a limit of $2,500, that card would be considered almost maxed out and would reduce their credit score, Roberts explained.
And although it won’t necessarily impact their chances of getting the loan, many buyers make the mistake of failing to shop around for a mortgage.
Kahri Washington, owner and a broker with 1st United Realty & Mortgage, told The Mortgage Reports that while many lenders’ rates are close in price to others, there are some that provide much higher rates than the norm. Buyers need to be careful of these, she said.
“Getting a bad loan with a higher interest rate can be very expensive in the long run, so be sure to shop around and get quotes in writing from several different mortgage lenders,” she added.
That’s good advice. A 2018 Freddie Mac study found the average borrower could save $1,500 over the life of a 30-year fixed-rate loan simply by getting just one additional rate quote when shopping for a mortgage. And the more quotes one obtains, the more they can save. Freddie Mac found, for example, those who obtained five quotes saved between $2,089 and $3,904 over the lifetime of their loans.