How to Avoid the 3 Biggest Mistakes in Your Mortgage Application
How to Avoid the 3 Biggest Mistakes in Your Mortgage Application
Are you getting ready to settle down in your dream home? The paperwork and documentation necessary for a mortgage application can seem complicated at first, and the likelihood of making a BIG mistake can feel overwhelming.
But it doesn’t have to be!
It’s well known that a good credit score and savings account are highly regarded when lodging a mortgage application; helping streamline your process and turning your dream into a reality quicker.
But these factors aren’t the only important information that will help secure a loan. According to the home loan experts at BMA Consulting:
“There are all kinds of paperwork you need to gather for your application. If you fail to provide all the required information, chances are the lender will reject your loan. This could set your dream back, so it pays to be prepared for all contingencies.”
If you want to be prepared for every situation and make your mortgage application process easy; here’s what you need to know. How to avoid the 3 biggest mistakes in your mortgage application.
How to Avoid Making Mistakes in Your Mortgage Application
After comparing home loan options and finding the best lending criteria to suit your situation and needs; it’s time to start preparing your mortgage application.
In December 2018, Digital Finance Analytics studied the Australian housing market; found that approximately 40% of mortgage applications were rejected. Due to a lack of compliance with current lending standards.
In light of this finding, the best and simplest way to ensure your ideal mortgage application is approved. Is to follow its individual instructions and requirements to the letter. Still, even with the best intentions, this can be easier said than done.
Mistakes can happen, so it’s important you know what to keep an eye out for.
What Are the 3 Biggest Mistakes in Mortgage Applications?
1. Not Reviewing Your Credit Report
Your credit score is a major indication to lenders of the likelihood that you’ll pay your loan back sufficiently. If your lender deems your credit score too low or inadequate; you may be offered a smaller loan sum than desired or be rejected entirely. This is why it is so important to check your credit report for any mistakes or errors; that will lower your actual score.
Credit reports display all products you’ve held in the past 2 years, including the frequency of your payments and limits. Experts from Bright Capital Finance explain to future appliers “the two most crucial things that could raise eyebrows in your credit report are overdue balances and missed payments. If lenders see such marks, you will be immediately tagged as high-risk and your borrowing power will be severely diminished.”
How to Avoid Submitting an Incorrect Credit Report
To avoid submitting an incorrect credit report; check for any inaccurate claims of late payments, credit defaults, and repeated debts with your financial institutions. If your circumstances have changed in recent years; don’t forget to address any potential outdated information that may cause inconsistency of information in your mortgage application.
2. Claiming Incorrect Incomes and Expenses
Expenses and income are another two major factors lenders use to gauge your capability to service a mortgage. By neglecting to include all information about your income and expenses; could result in lenders being unable to assess your borrowing power accurately.
Providing incorrect income information can also negatively impact your borrowing limits; get you into future financial trouble if you borrow too much. Lenders can even lodge a mark against your name for other mortgage applications in the future.
Owners of Ella and Friends, a pet photography business in Melbourne expresses the importance of properly tracking all expenses, “As business owners, we need to be really mindful in case we are ever in need of a business or personal loan. We always want to make sure any information regarding our expenses and income is 100% accurate at all times.”
How to Avoid Submitting Incorrect Incomes and Expenses
To avoid the mistake of claiming incorrect incomes and expenses; compare each of your bank accounts’ histories against your estimates. To see if it adds up correctly before submitting your mortgage application. Don’t forget income and expenses involving cash if you want a truly accurate borrowing estimate.
3. Submitting Incomplete Paperwork
Terms and conditions for every home loan differ. Lenders often ask for repeated details in order to verify information; especially for joint applications. This requires more time and effort for those applying. Those who do not give all documentation asked of them the first time; often experience a delay in approval progress due to ongoing correspondence with their lender. This extra time and correspondence can lead to rejection of an application or loss of a purchase opportunity.
Working with paperwork is a major aspect for AMB Roofing who offer the following exclusive tip for managing your data, saying “most people only think about their important documents the 1% of the time when they need them, which leaves 99% of the time for vital data to go missing. Getting in the habit of collecting paperwork and centralising it each week can ensure no headaches down the line. We use this strategy in our business and it could be just as effective when planning for a mortgage.”
How to Avoid Submitting Incomplete Paperwork
Regardless of your lender’s requests for exact figures and tedious verified details. You will need to provide the correct information and complete all paperwork; in order to increase the chances of loan approval.
Luckily for many, working with a mortgage broker is a great way to save time, confusion and stress. Not only do mortgage brokers know what is necessary to nail mortgage applications and how to submit complete applications to secure home loans on the first run. Their expert advice is often provided at no cost.
