Whether you’re looking to refinance an existing mortgage or shopping or your first home, knowing how to optimize your financial scenario is key for getting the best rate.
Here’s what NOT to do in order to obtain a lower interest rate mortgage:
Having stable, steady income for the last two years is key to proving that you are a worthy borrower. While your next career opportunity could be right around the corner, quitting your current job right before applying for a mortgage is a red flag for lenders. Wait until after closing to make those career moves.
Make a Big Purchase
Buying big ticket items like a car, boat, or other luxury item can get in the way of your mortgage application. If a lender sees that your credit was recently run for a big purchase like that, it can make you appear as though you’re trying to spend outside of your means. Hold off on other expensive purchases until after your home loan is funded.
Opening or Closing Credit Cards
Similar to the last point, when you seek to open a credit card, your existing credit score is run. Alternatively, closing an existing card can impact the way your creditworthiness is perceived.
When you close a card out, it lowers your overall credit limit (an accumulation of all cards you have in your name). In doing so, you run the risk of increasing your Debt-To-Income ratio if you maintain a balance on any of the remaining cards.
Delinquency and Forbearance
Loans that are 30 or more days past due, but not in foreclosure, are considered “delinquent”. This can reflect poorly on a borrower’s mortgage application and make it harder to qualify. Delinquency is most often an immediate deterrent for lenders, but forbearance is a different story.
If you were current on your mortgage payments but then sought out forbearance in response to the COVID19 pandemic, you may still be considered current on your loan. It will be noted at the top of your credit report that you are in forbearance. This may not impact your credit score, but it can alter a lenders analysis of your profile if seeking approval for mortgage financing.
If you’re curious about your ability to qualify for a mortgage, you can start a free, no commitment application online by entering some preliminary information. Our expert mortgage originators will contact you to discuss your financial situation and do their best to get you on the right track. Get started today by clicking “Apply Now.”