Applying for a mortgage loan is an important decision in a person’s life and is not something that should be taken lightly. Before you apply for a mortgage, make sure that you can afford the monthly payments. While your lender will look at your financial situation to help them decide whether or not they believe that you can afford a mortgage, only you know about your spending habits and the stability of your current job. Unless you are in a stable financial situation, you should wait before applying for a mortgage loan to avoid possible complications.
Before you even think about applying for a mortgage, you should consider your employment situation. Just because you are making a solid wage right now does not necessarily mean that this will continue into the future. The recent economic downturn in the United States led to countless people losing their jobs and, subsequently, their properties. Many of these people had to foreclose on their homes, which ruined their credit rating, making it next to impossible for them to get credit again in the near future.
To avoid having such a scenario become a personal reality for you, if you are relatively new to your job and could be among the first round of layoffs during another downturn, you should wait a while before applying for a mortgage loan.
Are You Ready?
Just because you can afford to purchase a home does not mean that it is the right time to do so. You may be tempted to dive headfirst into homeownership for the simple reason that you possess the means with which to buy some property, and perhaps you might even be considering the idea of selling your newly purchased home not long after buying it, despite your mortgage. While you can do this, however, such an action usually comes with penalties.
As a result, it is a good idea to make sure that you want to live in a specific area indefinitely before taking on a mortgage. Once you purchase your home, you are for all intents and purposes going to be tied to it for a lengthy period. Therefore, you should not purchase a home just because you possess the capability, as homebuying involves making a long-term commitment to living in a particular spot.
Another thing to consider is the interest rate that you will receive on a mortgage loan. If you have run into credit problems in the recent past, your credit score has undoubtedly been affected in a negative way. With some black marks on your credit report, you are less likely to get a favorable interest rate from lenders when you apply for a mortgage loan.
Resultingly, you would likely end up paying much more for your home than someone with good credit would have to, since a high interest rate will substantially increase your monthly payments. Therefore, if you have struggled with your credit recently, you should do everything that you can to increase your credit score before you agree to a mortgage loan.
Consider the Risks
Anytime you borrow money on the scale of a mortgage, you are taking a considerable risk. If you cannot afford to make your monthly mortgage payments, for whatever reason, the long-term financial problems that you will experience will be extreme in nature. Defaulting on a mortgage loan is one of the worst things that you can do, as it will lead to lenders not trusting you for a very long time.
The bottom line is that owning a home is a major financial responsibility, so it is vital that you are fully capable of making mortage payments — for the long term, if necessary — and have a pretty solid idea of what you are getting into before applying for your mortgage.