Getting a mortgage is the most tiresome part of buying a home. Most home buyers find it to be highly stressful and complicated even lenders will agree its a struggle.
Furthermore, a lot can go wrong during the mortgage process. If you are looking to buy a home, you need to be cautious. You may find yourself falling into some of these pitfalls.
Related: How to Avoid committing Mortgage Fraud
Meeting with just one mortgage lender
The lender may have worked for your friend yet this doesn’t automatically mean they will work for you. Unfortunately, most Kenyans only meet with one lender before signing up for a home loan. These borrowers are missing out heavily. How? Because lenders’ offers and interest rates vary. Getting a lower interest rate will save you money in the long run.
For this reason, get the best deal as possible by meeting up with at least 3 lenders. Moreover, start the search early before you start looking for a home. Remember to get a break down on the terms of the mortgage so you can compare.
Waiting until you can make the full down payment
Certain lenders require a certain percentage when you are applying for a home loan. However, mortgage rates are unstable-waiting will be a huge mistake. As time passes, the higher mortgage rates and home prices may go.
Consequently, this means you need to be discussing your home-buying intentions with lenders immediately. To get an approximate amount of what you can afford and how much down payment affects your finances consult Kenya Homes.
Being pre-qualified instead of pre-approved
They may appear similar but they are very different. Pre-qualification entails a basic overview of your ability to get a loan. You will provide the lender with your information(income, assets, debts, and credit)
you don’t need to produce any paperwork to back it up
As a result, you’ll get a rough estimate of what size loan you can afford, but it isn’t a guarantee that you’ll actually get approved for the loan when you go to buy a home.
Mortgage pre-approval, meanwhile, is an in-depth process that involves a lender running a credit check and verifying your income and assets. Then an underwriter does a preliminary review of your financial portfolio and, if all goes well, issues a letter of pre-approval—a written commitment for financing up to a certain loan amount.
In conclusion, if you’re serious about buying a house, you need to be pre-approved, since many sellers will accept offers only from pre-approved buyers.
Moving your money around
In order to get pre-approved for a home loan, you need to show you have enough savings to afford the down payment. An underwriter will have to ensure your finances have remained the same. Hence, moving a large amount of money will be a huge red flag for the lender. With this object, your money should stay still while you are in contract for a home.
Switching your job
Mortgage lenders like to see at least two years of consistent income history when pre-approving a loan. Consequently, changing your job while you’re under contract on a property can create a big issue in the eyes of an underwriter.
Hence, inform your lender if you are forced to switch jobs. Depending on the lender, you’ll simply need written proof of employment from your new employer that states your job status and income.
Applying for other loans
Note that applying for other loans while you’re buying a house will make a lender assume you’re desperate for money. This will lead to a change of your mortgage terms or even get you denied.
For more smart financial advice, keep it Kenya Homes.