If you are thinking about buying real estate in the near future, there are certain mistakes that you should avoid as they may hinder your mortgage options. The following are Michigan 5 common credit mistakes.
Michigan 5 Common Credit Mistakes
Mortgage companies evaluate the percentage of your debt to your income. Increasing balances either on your credit cards or on new loans can significantly alter that ratio. In general, the more debt you have, the less you can qualify for on a home loan. This is particularly critical after you have under contract to purchase a home. Lenders may re-run your credit report immediately prior to settlement to ensure that your status has not significantly changed. If you took on additional debts, this can cause problems with getting the loan.
As part of the loan process, lenders look at your previous and current earnings to assess your ability to pay back the loan. Consistency in earnings is very important. Shifting employment prior to or during the approval step can create problems with qualifying for a loan, especially if the new job is in a new field or at a lower pay rate. During the loan process, it can also lead to delays while the new job is verified.
Loan underwriters usually review your bank account statements over the past several months. Moving money to a new bank can cause problems. It is advisable to keep funds in the existing account until after the loan closes.
Large Cash Deposits
Most types of mortgages mandate that you use a certain percentage of personal funds for the down payment and/or closing fees. Mortgage companies confirm this by analyzing bank statements. Any cash transactions are carefully reviewed. You may be asked to verify the source of any transactions.
Shutting Down Accounts
While getting ready to purchase a property, you may try to diligently pay off debts. Prior to starting this, think about consulting with a mortgage consultant on whether it is required given your financial figures. If you do pay off debts, do not close the accounts as this will reduce your credit rating. It may be best to keep the accounts up with no balance.
Additional Information on Michigan 5 Common Credit Mistakes
The above Michigan 5 common credit mistakes covers only the most common mistakes. As a local real estate agent, I can refer you to local lenders in the Michigan area. You may reach me, John Doorn, at JH Realty Partners via phone at 616-292-7951 or email at firstname.lastname@example.org.