Applying for a conventional loan can be a bit overwhelming, but with a little bit of knowledge and preparation, you can avoid some common mistakes that might cost you money or even result in a loan denial. In this blog post, we'll go over the top 5 mistakes to avoid when applying for a conventional loan.
Mistake #1: Ignoring Your Credit Score
Your credit score is a crucial factor in determining your eligibility for a conventional loan. A high credit score can result in better loan terms and lower interest rates. If your credit score isn't where you want it to be, take steps to improve it before applying for a loan.
Mistake #2: Not Saving Enough for a Down Payment
While conventional loans require a minimum down payment of 3%, putting down more can result in a lower interest rate and a lower monthly payment. Not saving enough for a down payment can mean paying more interest over the life of the loan.
Mistake #3: Lying to Your Lender
Okay, we get it. Lenders can be intimidating. But lying to your lender can lead to a loan denial, or worse. Be honest about your financial situation and provide accurate information about your income, employment, and assets.
Mistake #4: Applying for New Credit During the Loan Process
Once you've been pre-approved for a conventional loan, avoid applying for any new credit, such as a credit card or a car loan, until after the loan has closed. This can negatively affect your credit score and your debt-to-income ratio, which could lead to a higher interest rate or a loan denial.
Mistake #5: Going on a Spending Spree During the Loan Process
We know you're excited about buying your dream home, but hold off on that fancy new car or furniture shopping spree until after the loan has closed. Making big purchases can throw off your debt-to-income ratio and potentially sabotage your chances of getting approved for the loan or result in higher interest rates. So, put down that credit card and postpone splurging until you've got those house keys in your hand.
By avoiding these common mistakes, you can increase your chances of getting approved for a conventional loan with favorable terms. If you have any questions or want to apply for a conventional loan, don't hesitate to contact us. We're here to help you navigate the loan process and achieve your dream of homeownership.