Common Mortgage Mistakes And How To Avoid Them
It’s highly likely that you will have read multiple blogs on what you should be doing before applying for a mortgage, but have you read any blogs on what you should be avoiding when applying for a mortgage? We believe that it’s often more beneficial to learn from other people’s mistakes than it is to simply read a guide on what to do. There are a lot of misconceptions when it comes to what you should be doing when applying for a mortgage and we aim to put a stop to these in this blog. In this post, we will look at common mortgage mistakes and will discuss how you can avoid them.
While you may think that changing jobs to opt for a higher paying role will work in your favour, this is not strictly the case. In fact, if you've changed careers as part of a relocation, you may have difficulty getting a lender to approve you. This is because lenders want employment stability and favour applicants who stay within the same industry. While some lenders may accept you if you've worked there for at least three months, others will only accept you if you have been with the same company for more than three years.
Of course, there are some exceptions to this, as if you are relocating for a job then you may wish to purchase a new home. In this case, as long as all other requirements are acceptable, you won’t have to worry too much. In addition to this, although a new job can hurt your chances of getting a mortgage, moving to a job with a higher salary can significantly lessen the impact as it increases what lenders think you can afford to borrow (Money, 2020). However, keep in mind that you will be asked to prove your new salary, so it’s a good idea to ask your employer to put it in writing.
Applying for new credit cards
While you may be tempted to boost your credit score in the lead up to applying for a mortgage, we don’t recommend it. This is because too many credit inquiries over a short period of time will hinder your chances of being accepted for a mortgage. So, even if you have excellent credit, try to avoid the urge to apply for any credit cards 3-6 months before applying for a mortgage.
According to Money Saving Expert, lenders will search your credit file every time you apply for a loan, credit card, overdraft, and increasingly mobile phone or utility contracts too. This search is registered on your file even if you decide against taking the contract out.
Closing Major Credit Card Accounts
While you may be tempted to close all lines of credit in an attempt to get your mortgage application accepted, we would recommend against doing this. You may view credit as a bad thing, however, closing a lot of credit may also raise your debt to credit limit ratio, which, ultimately, can hinder your chances of being accepted for a mortgage.
According to Experian, it is actually best to keep unused credit cards open so that you benefit from a longer average credit history and a larger amount of available credit. This is because closing a line of credit affects the amount of credit you have available.
If you would like more information on things to avoid when applying for a mortgage, you can read our previous blog, ‘reasons your mortgage application may have been rejected’, today. Alternatively, you can contact one of our helpful mortgage advisers, or browse our full list of blogs here.