Nowadays qualifying for a mortgage loan has become very hard, as new guidelines expect banks to confirm each part of a borrower’s financial background, before making the credit. As a borrower, you should avoid certain things before applying for a mortgage loan and I am sure by avoiding this thing you will have more chances for the approval.
Today we will discuss things that you should avoid before applying for a Mortage loan.
Whether it is a vehicle Loan, Housing Loan or a Personal Loan, they have one thing in common that is they increase your total debt, as a result, it can decrease your chances for getting a Mortage loan.As I said earlier qualifying for a mortgage loan has become very hard, when you apply for a home loan the lenders or the financial institutions will consider the amount of debt you currently have.
They will compare your recurring monthly debts to your gross monthly income. This is known as the debt-to-income ratio or DTI. This is one the most important as well as a vital qualification requirement for borrowers in the current lending environment.
My point is if you want your home loan to be approved increase your DTI, So if you are planning for a mortgage in the near future, try to avoid taking out other loans or credit lines.
In the previous paragraph, we discussed the importance of the debt-to-income ratio when applying for a mortgage loan. Did you know that your credit card balance is also included in this calculation as well? So carrying too much of Credit Card Debt can also be the reason for Mortage rejection.
It makes you more of a risk, in the lender’s eyes. The only solution for driving up your debt-to-income ratio is by limiting the use of credit card, at least before applying for the Mortage loan. It can also lower your credit score by increasing your overall “credit utilization ratio.”
One of the most important thing that a lender sees before giving approval is the credit score. A higher score indicates a lower risk for the borrower and at the same time, a lower score increases the risks for lenders. My point is your payment history also plays a vital role for the approval, as your payment history accounts for 35% of your overall credit score which is more than any single factors and the most interesting and noticeable thing is, just a single late payment can decrease your credit score up to 50%(depending on the circumstances ).