Choosing and visiting homes are a lot more enjoyable than applying for a mortgage. A mortgage is a form of house financing wherein you borrow money from a lender and your new house will be the collateral. With that said, unless you have secured a pre-approved mortgage before you start house hunting, you may not be able to purchase the house you want. This is because you cannot be sure whether the bank will approve your loan application. As a result, you can’t compete with other homebuyers who can easily close a deal.
Applying for a mortgage must be taken seriously. You have to understand that mortgage mistakes can lead to huge losses. If you need a mortgage but don’t want to throw away a huge investment, you must learn from these common mortgage mistakes.
Mistake #1: Failure To Arrange Your Finances Beforehand
If you are unable to arrange your finances, you might suffer from costly mortgage mistakes. Long before you start house hunting and applying for a mortgage, make sure that your finances are in order. You must know your current financial position and ensure that your finances look good. Here are a few things you need to do:
- Perform A Credit Check: You must perform a credit check at least half a year before applying for a mortgage. In doing so, you will be able to correct any errors in your credit record and mend any negative scores. You have to understand that if you have a low credit rating, you will need to pay higher interest rate. In worse cases, your loan application might be declined.
- Pay Your Bills On Time: This is a technique that can help fix your credit score. Remember that late payments will negatively affect your rating.
- Avoid Huge Changes In Your Credit: This means that you must avoid making large purchases or avoid job hopping before your loan is approved. These activities can affect your debt-to-lending ratio; thus making it tougher to get a loan.
Mistake #2: House Hunting Before Getting Pre-Approved
You must not confuse pre-qualification with pre-approval. Pre-qualification is simply your lender’s estimate of the amount you can borrow based on the financial statements and information you have given them. The information has not yet been validated; thus it carries little importance. What you really need to do before you start looking into potential homes is to get pre-approved.
Pre-approval involves almost all the procedures of a full-approval except for the appraisal and title search. Getting pre-approved for a mortgage will provide you with a good idea of what you can afford. In addition, it also puts you in a better position once you have chosen the house you want because you can quickly close a deal if you want to.
Mistake #3: Failing To Shop Around For Lenders
A lot of homebuyers are under the false assumption that the lenders are required to charge the same fees for appraisals and credit reports. The truth is that lender fees are negotiable and they can vary by lender. You can save money by searching out a few lenders and comparing their mortgage rates, fees, and terms. Although this is time-consuming, it can help you find the best deals possible. You might even save thousands of dollars in the long run. You should not acquire a single mortgage rate before applying. With that said, you must never forget to consider other mortgage fees.
Mistake #4: Forgetting To Take Into Account Additional Expenses
When you are trying to determine what your monthly payment will be, you have to realize that your mortgage payment isn’t everything. You might end up with a mortgage you can’t pay off if you forget to take into account additional expenses, including property taxes, homeowner’s insurance, maintenance and repairs, and utility bills.
These are just four of the most common mortgage mistakes that homebuyers commit. It is advisable to educate yourself about the basics of the mortgage process. In addition, it is best to be familiar with these mistakes to avoid making them.
- License: Royalty Free or iStock source: http://www.freedigitalphotos.net/images/Property_g196-Mortgage_Application_Denied_Stamp_p96064.html
Kris Bennette is a writer for real estate website where her readers can read more comprehensive information about mortgage application procedures. In this article, she lists down 4 of the common mortgage mistakes.