You may think you're ready to get a mortgage - you've been reading up on mortgages, saving money, and working on your credit score. However, due to a series of recent policy changes, the "ideal borrower" profile became seriously specific. Therefore, some of the qualifications to obtain a mortgage loan have drastically changed. Here are 5 tell-tale signs that you are not ready for a mortgage:
Putting forth your down payment will drain your savings.
If putting forth your down payment will drain your savings, you aren't ready to get a mortgage just yet. There are so many additional costs associated with buying a house such as maintenance, closing costs and the home inspection. If you drain your savings, you aren't giving yourself much of a financial cushion in case your extra expenses exceed your original estimates. Therefore, you could be at risk of potential foreclosure if you have a hard time keeping up with all your bills and expenses.
You struggle to make rent payments every month.
If you're struggling to make rent payments every month, you need to wait a little longer until you obtain a mortgage loan. The reason why is because mortgages are extremely forgiving in terms of late payments and missed payments. These botched payments will represent blemishes on your credit score, and will permanently damage your ability to take out credit in the future. If you're experiencing a financial hardship that is leading to this struggle, you need to address that issue before taking out a mortgage loan.
Your credit score is less than 620.
Most lenders will turn you away quickly if your credit score is below 620. Why? Because this score proves that you've had a consistent trouble making payments in the past and can't necessarily be held accountable. Work on improving your credit score before applying for a loan.
You can't prove that you've had a consistent two years of solid income.
If you can't prove that you or your spouse have had a consistent two years of solid income, you will have a hard time obtaining a loan because you will represent a risk to your lender. He or she won't be able to gauge if you will be able to make your payments on time. This is hard for those who change careers often or are entrepreneurs. However, if you can show that you consistently make enough on a regular basis to pay for mortgage payments, you should be fine - you will just have to work your way up to that point.
You don't know how long you will stay in this new house.
There are so many costs associated with buying a home such as closing costs and home inspections that you won't get back when you move out of that house. It's a well-known fact that you will actually lose money if you stay in the house for less than five years, so you might want to think long and hard about taking that loan if you plan to stay less than that amount of time.