Homeownership is usually thrilling, especially for a first-time home buyer. It fulfills a lifelong dream and offers a new sense of reliability. However, mortgage missteps are likely to occur during the home-buying process, whether you are a first-time or veteran homebuyer.
Being prepared for some of the most common pitfalls can make it easier to plan ahead and develop a strategy to avoid them. Here are four common mortgage mistakes to avoid when buying a home.
Your credit score goes a long way in determining your ability to qualify for a mortgage and the interest rate you get. For instance, a person with a good credit score often gets a lower interest rate and better loan terms than an individual with poor or average credit. However, you can still get a mortgage and own your dream home, even with a poor credit score. Click here to learn more about bad lender mortgages.
Most lenders will pull up a tri-merge credit report once you apply for a mortgage. This report combines your credit information from the three major credit bureaus. Ensure you know what your credit report contains before your lender does. Your report might have errors or inconsistencies that may hurt your credit score. If you notice any issues in your credit report, contact the credit bureaus for rectification.
Mortgage loans vary from one lender to another. Each lender provides different loan products, terms and rates. They also have different qualifying requirements, so it’s essential to compare loan options from a few disparate lenders.
The more you shop around, the higher the chance of getting a great deal on a mortgage at the lowest rates possible. Shop around for at least three different lenders and get all rate quotes on the same day, as rates tend to change regularly.
Another common mistake among home buyers is shopping for a home before getting mortgage approval. While being pre-approved for a mortgage isn’t a requirement when buying a home, it’s highly essential. Lenders offer pre-approval letters to clarify a potential borrower’s creditworthiness and ability to afford a home of a certain price range.
A preapproval letter gives you and your home seller an idea of the type of mortgage you qualify for and how much house you can afford. It also determines the interest rate your lender will likely offer. The letter can sometimes help your loan close faster, as the lender already has much of your financial information on file.
Before finalizing everything, it’s good to know the associated costs to avoid last-minute complications. Make sure you have set aside enough money to cover home inspection, moving costs, lawyer and property insurance.
Closing costs are usually paid upfront on the day your home purchase is finalized. You can consider buying discounts or mortgage points, which may reduce your interest rate by prepaying a percentage of the total amount of your mortgage.
Buying a home can be exciting but, at the same time, stressful. It’s easy to get lost along the way due to the many steps involved, which can sidetrack your closing and cause a lot of hassles. Try to avoid these common mistakes to ensure you don’t unintentionally sabotage your mortgage and the purchase of your dream home.