If you’re in the market to buy a home, you’ve probably already started looking around, and you may have even found the home that you believe is the one you’re meant to buy. But what if some unforeseen surprises spring up, surprises that stop your home purchase deal in its tracks? What can possibly go wrong when trying to purchase a home? The following are five things that can possibly keep you from realizing your dream of home ownership:
1. Having Low Credit
When you apply for a mortgage to help you finance your home purchase, one of the first things that a bank or other lender will do is perform a credit check on you. If you have low credit, you may find that getting approved for a mortgage will be extremely challenging. Lenders generally frown upon consumers who have credit issues, making the mortgage approval process difficult for those individuals, and thus home ownership difficult as well.
2. Failing to Pay Your Credit Card Balance in Full and on Time
Consumers who are delinquent when it comes to failing to pay the full balance of their credit card debt on time every month basically show creditors and lenders that they are not completely responsible with their finances. Being delinquent in this manner will give these consumers nothing more than a bad credit score and will make their chances of getting approved for a mortgage much more difficult. The best practice is to only use a credit card to purchase what you can afford, pay your card balance in full, and make your payments on time every month.
3. Increasing Your Debt-to-Income Ratio With Lavish Expenditures
If you have your sights set on purchasing a home, don’t make any large purchases before you are able to seal the deal on a property. Committing yourself to large expenditures such as a new truck or boat will only increase your debt-to-income ratio, which could make loan officers think twice before giving you final mortgage approval to finance your home purchase. Avoid this issue by resisting the urge to spend a lot of money on any other big-ticket items right before you plan on buying a home.
4. Borrowing More Than You Can Afford
Mortgage lenders usually are reluctant to help people who have demonstrated what they consider to be a lack of responsibility with their borrowing habits and finances in general. Therefore, in leading up to the time when you plan to try purchasing a home, get into the habit of borrowing via various types of non-mortgage loans and credit cards only what you can afford. Not only will this make it easier to avoid excessive debt, but it will also make it easier to borrow funds when the time comes to get help from a home loan lender.
5. Getting Rejected for a Mortgage After Being Preapproved
It is recommended that prospective homebuyers get preapproved for a mortgage for a certain amount before they even enter into a deal for the purchase of a property. That being said, unfortunately it is true that lenders who provide preapproval will oftentimes later back out, usually after reviewing all of the homebuyers’ assets, debts, and loan amount. The sad fact is that granting preapproval is not the same as committing to lend money to an individual. After negotiations have begun on the purchase of a property, the lender will review all pertinent paperwork, and if anything doesn’t meet their standards, you can get turned down for a mortgage.