Top 5 Mortgage Mistakes

Securing a mortgage can be a bumpy road. Not every borrower’s path is the same, but generally speaking, there are a few key mistakes made by homeowners that can be avoided. Here are five of the most common mistakes:

Not checking credit reports. Waiting until you apply for a mortgage to check your credit can be a deal breaker. Credit report errors happen all the time, but you do have the ability to correct errors and increase your score, which will help you secure a lower, more favorable interest rate.

Waiting for the lowest rate. Mortgage rates fluctuate all the time, and my borrowers wait for rates to hit “bottom” before making a move. Unfortunately, interest rates continue to be on an upward trend, and more than likely the market’s “bottom” can only be realized after the fact.

Failing to lock in a rate. Once you’ve seen a rate that is most favorable, a huge mistake is not locking in that rate. Timing is very important, especially if you’re building a home. 

Mis-truths. False statements on mortgage applications can come back to bite you, to the tune of jail time, a $1 million fine (or both), and a completely ruined credit score (as if it matters at that point). Quite simply: don’t do it.

Lastly - going in blind. There are a lot of costs involved in finalizing a home purchase. Above just the annual percentage rate (including actual interest and any additional costs), you may also incur closing costs, commissions, points and other fees that may not be included in the mortgage.

Do your homework, and work with Faber’s experienced professionals who will help walk you through the process.

Quick Mortgage Tips

Getting a mortgage used to be a much simpler task, but now the lender must do more due diligence before approving a borrower than in the past. It’s not impossible to be approved, but there are certain things mortgage shoppers can do to expedite the process.

First and foremost, it’s important to get a copy of your credit report. Fully digest its contents and flag any discrepancies. If you’re positive you paid off that debt or late charge, dispute negative marks as soon as possible. Generally speaking, it is always a good idea to pay off debts and loans prior to applying for a mortgage, but if you just can’t swing it, keeping your debt to credit ratio under 20% will go a long way.

When filling out your mortgage application, it’s important to be as transparent as possible about all assets, debts, and incomes. Chances are, the truth will be revealed in some fashion, so it is better to be upfront from the get-go and reduce delays in the process.

Once you’ve figured out your debt-to-income ratio and are comfortable with a monthly commitment, do your best to come up with the largest down payment possible. Not only will lenders look favorably on this, but you’ll be doing yourself a favor in the long run by lowering your monthly financial commitment.

Still have questions about applying for a mortgage for your Faber Home? Our sales associates will help you get on the right track and connect you with lenders and credit counselors. Give us a call today!

What's in Your Credit Score?

You may think your credit score is just a number, but to a lender, it can be the difference between offering you the best available market rate, and a much higher mortgage payment.

Understanding what goes into your credit score is important. Short credit history can been seen as a negative on your report, as it reflects a shorter time period of financial responsibility—the less experience you have making (any) payment, the less likely you are to understand how to handle a larger payment, like a house. Late payments can put a damper on your credit score, too, as they reflect poor money management. Additionally, having a high debt-to-income ratio can impact your score, because it shows you are charging beyond your means.

 Here are some tips on improving your credit score before applying for a mortgage:

1.     Get a credit card if you don’t have one. Showing lenders you’re able to manage small amounts of debt and be responsible.

2.     Use your credit cards lightly, if at all. Some suggest not making any purchases 6-9 months before applying for a mortgage. This means no fancy restaurants, new Play Station consoles, or shopping sprees. Use the money you’re not spending and apply those dollars to your debts! Maintaining balances under 30% of the credit limit can really make a difference.

3.     Make payments on time for car payments, medical bills, and credit cards. If possible, pay off these installment loans as low as possible.

4.     If you’ve been a good customer, some lenders may agree to forgive that one late payment from your credit history. Make some calls and see who would be willing to help.

5.     Don’t recognize something on your credit report? Mistakes happen—but it’s ultimately up to you to do your homework. Dispute old negative claims when you can.

You may be missing out on the best interest rates if your credit score is not above 760, and scores in the 600’s may need a couple years to resolve. If you’re ready to build your home, but need a little help with your credit score, Faber can set you up with credit counseling to get you on the right track. We’ll work with you to get you in the home you deserve.