Mortgage seem to be the most intricate and daunting process especially for people with little or no experience in borrowing or dealing with debt.
When searching for a new home, you may begin by counting rooms, windows and bathrooms. But other important elements need to be taken care of to avoid the biggest mortgage mistakes when buying the property.
For example, a small mistake or error like Paying even 0.5% higher in interest on a mortgage amount can end up costing big money over the entire mortgage term.
So, it is imperative not to make a mistake and do some research before wading into the world of financing.
Understanding these mistakes is crucial: If you avoid them, you will be able to uplift the odds that your mortgage application moves smoothly through the process. If you don’t avoid them, you will either probably slow the process or you will even scuttle your chances to even be eligible for the mortgage.
Dodging the numbers whether for income or debts is never a good idea. New numbers can lead to a delay and you might never be eligible for the mortgage. So be upright and truthful throughout the process. Also, mistakes made before or during the process can lead to a higher interest rate or not getting approved for the mortgage.
To save yourself money, time and headaches, and avoid making a financial mistake that can plague you for decades. Start your journey to homeownership and secure a financially sound mortgage by avoiding these most common mortgage mistakes;
1. Shopping for a house before a mortgage
It is thrilling to look for homes, visiting various properties and dreaming about homeownership than to focus on finances. But this is a common mistake that can be costly in the long run. It is not a smart decision to not learn about the amount you can borrow before finalizing the property as it can lead to rejection at a later stage. So, get your pre-approval letter to know the estimated amount you can borrow before finalising the home. It will show the sellers that you are a serious buyer.
2. Not checking credit reports or score and Erroneous Information.
If you are planning to buy a house, pull your credit report and score well in time to know where you stand. As borrowers with higher credit scores tend to get a low-interest rate and those with a bad credit score will have to make changes to improve their credit score. So, it is best to get the full picture well in time. Also, scout for erroneous or incorrect information in your credit report that might have slipped through the cracks as with these mistakes you will end up paying more interest rates and shelling our money from the pocket!
3. Applying for additional credit before closing
The period while you have applied for a mortgage is the most critical, try and leave your credit alone during this time. Applying for a new credit card even though you don’t use it or buying a new car etc. can hamper your credit score thereby affecting the mortgage process.
Though it is true new credit cards can be alluring and enticing but it could be an admonishment to the lenders that can lead to further sinking of the credit score.
4. Changing Jobs/Employment
Steady employment most probably a job for two years is considered as financial stability by the lenders to be eligible for the mortgage. New job opportunities can have a myriad of benefits but a change in job or employment can affect your mortgage deal so avoid shifting or changing your job before closing.
5.Waiting Too Long After Finding a Good Rate
Though homeownership is a critical decision and one should not hastily decide but once you get a good rate that suits you it is imperative to bring it to a conclusion well in time before the rates change. As mortgage rates tend to change over the months, so embrace it before the situation changes and opportunity vanishes.
6.Not Shopping Around
Many people are fearful and apprehensive of shopping or exploring too many lenders. Though there are slight drawbacks but it is not wise to miss out on a bag full of benefits for minor shortcomings. As even the slightest or fraction of a lower interest rate can save you boatloads of money over the years (till the mortgage term). Trust us, a cluster of inquiries and exploring different lenders will not hurt your credit score as much as the hard pull for monthly credit card payments.
7. Overlooking the other hidden costs of homeownership
As we all know homeownership is a life-changing decision and includes countless expenses but most of us fall into the trap that by applying for a mortgage, we only need to bear the expenses of down payment and the rest all will be taken care of. This is another major mistake made by homeowners as apart from down payment be prepared for expenses like home inspection, appraisal, title fees on top of the down payment. Apart from these expenses like routine maintenance, utility bill payments etc. should also be calculated as these will also need your attention soon after the purchase.
Purchasing a home is a decision that needs to be pondered, calculated and planned a bit before jumping to the conclusion. Make sure to contact MMC, we have lenders and financial advisors to see the correct options that suit your specific financial situation.