You are probably like so many people and have a dream of being a home owner some day so that you can stop wasting money on rent or maybe you’re tired of the apartment life with landlords and other restrictions. Maybe you just want the freedom to do almost anything you like with your property.
Well home ownership can definitely help you achieve those dreams. Only problem is that getting that house you so much desire is not quite that easy. I mean there is a process that you have to go through to see if you qualify for the purchase of a home.
If you have applied for a mortgage before and failed then you could be making some of the mistakes listed below. If you are thinking about applying for a mortgage then you need to make sure that you don’t make these mistakes as well. Here is the list of things that could be hurting your chances of owning your own house.
1 You didn’t put enough of a down payment down (or any at all.)
Yup, you have to bring a certain percentage of what a house is worth to the table. According to Zillow, that could be anywhere from 5 to 20 percent of the cost of the house. This will lower the cost of your loan, and shows banks you’re serious about making your mortgage. You need to make it rain if you want a house.
2 You didn’t do the math
Cool, you have a down payment, but did you calculate property taxes and what your monthly mortgage would be for the next 30 years of paying off that loan? Yipe! Better make sure you have it all planned out. Basically, if your mortgage costs more than 28 percent of your total monthly debt, you’ll have a hard time convincing the bank it should give you a loan.
3 Didn’t Check Your Credit
Okay, so you have a down payment and think you can handle a 30-year loan. But did you check your credit score? If it’s too low, a bank might charge you a higher mortgage rate or, sadly, reject your loan. Make sure you’re paying all of your bills on time and keeping your credit card at less than 20 percent of the limit. The FTC has a list of ways you can check your credit.
4 Don’t Have Any Credit
Whoops! You need at least three lines of credit with at least a two year history on each line so a bank can evaluate you as someone to lend to.
5 You opened new lines of credit while finalizing your loan
Similarly, your credit might be good when getting a loan, but if you start to rack up expenses while closing the deal, the bank could end up changing the rate on you due to new expenditures. Your debt-to-income ratio needs to stay under 43 percent, in most cases, to qualify for a mortgage. Too many expenditures might change that percentage and cause concerns for the bank. Play it safe until you’re in the clear.
6 You Have Too Much Debt
Some debt is fine, but if your debt-to-income ratio is too high, a bank probably won’t approve you. Make sure to calculate all of your debts and use calculators, like this one on Zillow, to easily estimate what that ratio might be for you.
7 You Didn’t Get Pre-approved
In order to put a down payment on a house, you need to know how much you can actually expect the bank to loan you. It doesn’t work the other way around. Know what the bank will lend you, and then find a house in that range.
8 You haven’t been working long enough
Banks want to be sure you can make money — and continue to make money — to pay for the loan. Therefore, you need to have at least two consecutive years of employment at the same employer.