Mortgages are tricky transactions, partly because banks and lenders are cautious about giving approvals for a second mortgage. The will be equally cautious about making the final transfer of funds to a bank account. Various checks need to be performed, reports filed, and legal work completed.
Even if you have been approved for a second mortgage, your application can be derailed if your circumstances change at the last minute. That means you may not actually receive the funds. Remember that even if you have been approved for a mortgage, your bank or lender is still monitoring your financial health. During this period it’s important to be diligent about your finances and overall spending; you shouldn’t do anything unusual or irregular. In this post, we are going to look at what kinds of factors can delay the approval of a mortgage by a bank or lender.
Be transparent about your finances
If you have ever defaulted on a payment, let your broker or lender know immediately so that you can explain the circumstances when applying for a second mortgage. You may also need to select a lender that doesn’t see a past default as an issue. Another reason that mortgage applications get declined is missed bill payments. This can be a costly error during a second mortgage application. Ideally, when you apply for a second mortgage, your credit history should be squeaky clean. A missed payment on even a basic bill, such as a cell phone or credit card bill, can impact your chances of getting a second mortgage for quite a few years. The easy way to prevent this from happening is by paying your bills on time every time. You can do this by setting up automatic payments with your bank. If you don’t know your credit history or are concerned about something that may have happened in the past, check your credit history online.
Save big purchases for later
That new Tesla you’ve been dreaming of, or that ski vacation . . . they’re on your list and that’s where they should stay. At least until you’ve completed the mortgage application process and received the funds for your second mortgage. Your ratio of debt to income is one of the main things that is looked at when a lender decides whether or not to approve your mortgage application. If, in the middle of this, you take out a loan for a major purchase what happens is that your debt-to-income ratio is changed significantly. This may affect your bank’s perception of whether or not you can repay the second mortgage. Paying cash for your major purchase isn’t an answer, because your lender will see the cash withdrawal from your account. They don’t want to see a low bank balance or that you are cash-short. This same advice applies to credit card applications – wait until after your loan approval
Changing jobs or losing your job is something you don’t want to happen while you apply for a second mortgage. A lender or bank wants to see you in steady employment for at least 12 months. If you are tempted to change jobs and have a great offer, be sure to run this by your lender first to find out if it will affect your chances of mortgage success.