3 seemingly harmless things that could prevent you from getting a mortgage

Most people cannot afford to buy a house. That’s what mortgages are for.

To get a mortgage loan, you will need a good credit rating and a little money to buy a house. You’ll also want to avoid doing anything that could hurt your chances of getting approved for a home loan. Here are three moves worth avoiding.

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1. Finance another purchase

Whether it’s a car, furniture, or a new TV, taking on more debt right before applying for a mortgage could make it more difficult to get approved. One of the main factors lenders look at when evaluating mortgage applicants is their debt-to-income ratio. This ratio measures the amount of your debt compared to your income. And as you can imagine, the higher it is, the less attractive you will be as a mortgage candidate.

That’s why it’s a good idea to avoid incurring new debt when you’re looking for a home. Now, if your car stops working and you need a new one, a car loan may be inevitable. After all, you need a vehicle to operate. But if you’re thinking about financing purchases that may be delayed, you’d better wait.

2. Apply for a new credit card

Normally, applying for a new credit card won’t hurt your credit score too much. A single credit card application will usually result in a thorough investigation of your credit report which will lower your score by less than 10 points. But if you are on the verge of having sufficient credit for a given lender, just one application could put you below the threshold required to qualify for a home loan.

The minimum credit score for a conventional mortgage is 620, but some lenders have higher standards. Suppose a given lender wants applicants to have a 640 or higher, and you start with a 640, and then apply for a credit card. You might only arrive with a 634, which will hurt your chances.

3. Change jobs

Mortgage lenders generally like to see consistency on the employment front. After all, they want the assurance that you will be able to meet your monthly payments. So, if you change jobs shortly before applying for a home loan, it might make a mortgage lender too nervous to lend you money.

Now there is usually an exception to this rule if you get a new job in the same industry. If you are an accountant changing companies, this may not be held against you. Also, if your new job is making a lot more money than the old one, it could help you get a mortgage.

Just be careful if you change careers, especially if it can negatively impact your income. Going from a full-time accountant to a freelance graphic designer can cause a lender to turn you down for a mortgage.

Getting a mortgage can be trickier than you expect. If you are applying for a home loan in the near future, do your best to avoid these moves that could make it harder to accept a lender.

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About Melanie Tweed

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