If you are planning to apply for a mortgage or to refinance your current mortgage there are several things to be aware of. Of course the terms of each mortgage are quite important but we will look into other issues that are only concerning the mortgage but not really connected to the mortgage specific terms.
The first thing to take care of is your credit history. People with bad credit history are refused mortgage loan or are able to get mortgage loans with terrible conditions. Your credit score is one of the main things any bank or building society will look into when you apply for a mortgage.
The credit score is calculated through a complicated formula, but it is easy to learn the things that influence it. In general missed payments, huge unpaid loan, bankruptcy are the factors that can ruin your credit score. Moreover certain financial behavior such as trying to get a second refinance for a loan within one year can deadly ruin your credit score.
You should be very careful with your credit cards as well. Opening a new credit card or making excessive charges during the application process may also prevent you of getting the best mortgage deals.
First time home buyers trying to get a mortgage should be very careful about their employment and housing history as well. Mortgage companies are not only interested in your income but in the duration of your last employment contact. The longer you have been with the same company the better. While applying for a car loan usually requires about 6 months employment with the last employers, applying for a mortgage may require more than two years. The same rule applies to your housing. You will be asked for the documents of at least one year housing history.
As mentioned above any bank or other lending company will look into your incomes and other assets. The worst thing you can do is to lye about your incomes in the mortgage application form. Do not forget that all the information will be checked and you will need to provide proof for your incomes. Of course if you are caught lying your chances for a decent mortgage deal are almost none.
People who are looking for refinance mortgages usually fall into the pre-payment penalty trap. If you are considering a refinance mortgage check the conditions of your current mortgage carefully. If there are huge pre-payment penalties it may turn out that it is best to keep your current mortgage instead of getting refinancing.
Another refinancing mistake similar to the one above is not to get a good faith estimate of the fees associated with the transaction. Even if the pre-payment penalty is not big or there is no such penalty, the fees connected with your new mortgage might be quite high. When signing the documents bring the good faith estimate with you and make sure the fees stated in the contract are the same.
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