Things You Need To Know Before Getting A Mortgage

Written by: Jennifer Watkins

A few years ago when our economy underwent a giant economic crisis, it changed how the mortgage industry would look forever. It used to be incredibly quick and easy to get a loan for a home mortgage, all it took was the signing of a few papers and your basic income information, and you were ready to move on into a new house. Unfortunately, the economic crisis a few years ago made it so that getting an un-complicated, fixed-rate mortgage is a headache and a process that has hurdle after hurdle to get through. If you go through the secondary market especially, the process is far less than easy. Nowadays when you apply for a mortgage, the lender that you are attempting to go through is going to look at everything about you including what your personal finances look like, what your credit history is, and whether or not they think you deserve to qualify for a home mortgage loan. Underwriters have put together a comprehensive list that will give you some great information on what you should know about with mortgages in our market today.
1.) Your assets do not matter to underwriters
The thing that underwriters care about most is that you will have enough money in your bank account to make a down payment on your house. This is all they care about, other than that it does not matter much to underwriters how much you have in your account. When you start to fill out your application for your mortgage, there will be a place on the application for you to list out your assets like your cars or anything else of value. The only reason an underwriter will care about the assets that you have to your name is if you plan on using those assets as collateral in case you cannot pay your mortgage.
Instead of caring too much about your assets, what underwriters really care about the most is how much you make in income. So, if you have millions of dollars in the bank, but you only make $10 an hour where you work, you will not get approved to get a mortgage because your income says that you do not qualify for it. The bottom line is that your lenders do not care if you have luxury cars and millions of dollars in your account. If you do not make enough to qualify for a loan, then you will not be able to get one!
2.) If you do not have a credit score, it will hurt the process
Unfortunately, our society has things a bit backwards nowadays. It is actually somewhat frowned upon for you to pay for everything in cash, or to save up before you buy anything and pay it all in full. And if you do not have a credit card because you have always been responsible with your money, it could actually hurt and not help when you are applying for a mortgage. The backward part is that you may not have a credit score because you have always been diligent with your money and never gone into debt or needed credit. Meanwhile, the person who is neck-deep in credit card debt will actually more than likely have an easier time getting a mortgage than you will. This is because your bank or mortgage company wants a paper trail that shows that you pay all of your bills on time and that you can handle this type of line if credit. So, if you do not have a credit card or corresponding credit report, then showing a lender that you can pay your bills may be a tougher job and therefore it could be harder to get a mortgage.
3.) It will be hardest to qualify for a mortgage if you work for yourself
It is typically hardest for people who are entrepreneurs or own their own business to get a loan for a house because they are able to write off so much of the income they make which makes it look as though they are not bringing home enough money to pay for a mortgage. This is not a rule that applies to all business owners, and underwriters are typically able to use tax returns to help prove your income. As a business owner that is trying to get a mortgage, you have to be able to prove that you make a certain amount of income so that a lender will be willing to give you a loan for a new home.
4.) Underwriters do not care if you were able to pay your last mortgage down or not
Underwriters and lenders do not care if you were able to pay extra on your mortgage on top of what your regular payments are in order to pay your mortgage down more and more. Of course, this does not hurt your chances of getting another mortgage for a new home, but it is not a qualifying factor for things they look for. In fact, a mortgage company actually makes more money off of you when you do not pay extra on your mortgage to pay it off faster and take it to the full term of the mortgage agreement. So, having a paper document that shows that you paid off previous mortgages really does not help in the long run.
5.) Do not stress too much over collection accounts
underwriters and mortgage lenders typically are not too concerned if you have a long list of collections from things like medical collections that are going unpaid because they understand that sometimes sickness is unavoidable and it can take all you have to get better. The things that they look at are collections such as old cell phone bills, utility bills that never got paid, and other small things like that. Even if you have several of these unpaid collections they are typically not going to hurt you too bad unless they are extremely excessive in how much has gone unpaid. A lender will not forget that you have these collections and may make note of it, but many times it does not hurt the borrower too badly when it shows up as long as your credit score is high enough to pass their inspections.
6.) Don’t make any big changes like quitting your job or financing something big
Before you close on your new house it is not wise to do anything such as quitting the job that gives you your steady income or financing something big like a car or a boat. In other words, stay as much in your ordinary financial routine as you possibly can. People have been known to quit their jobs or run up a lot of credit card debt when they are in the middle of an application for a mortgage, and when the lender goes to pull their credit up again and see that things like your credit score or your employment verification have changed, then they can pull out any time and not give you their money! Stick with what you have until you have signed the closing documents and the house is yours.
Unfortunately in the day and age that we live in, it can be hard and confusing to get a mortgage loan approved for a new house. The above tips can help you navigate the field a little easier and get you set up for success and in your new home as quickly and as painlessly as possible.


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