How to Avoid the Biggest Mortgage Mistakes
If you are applying for a mortgage for the first time, it can be
somewhat daunting. Not only are you facing the prospect of taking on a
huge debt but you also must be prepared to make your way through a ton
of paperwork as well as face the responsibilities of future home
ownership. What is even worse, along with all of these new
responsibilities, some new homeowners discover far too late that they
made mistakes along the way that made the situation even more difficult.
Perhaps one of the biggest mistakes that any homebuyer can make is not
checking and repairing their credit before they apply for a home mortgage. This
is even more crucial now than it was a few years ago. Lending
restrictions have become much tighter today than then and as a result,
it is more difficult to become approved for a mortgage loan. Even if you
are able to become approved for a loan, if your credit is not excellent,
you could likely find yourself facing a steep interest rate on your new
mortgage loan. Therefore, it is important to find out where your credit
stands before you apply for a loan and do what you can to improve it as
much as possible. Even little things like paying down your credit cards
and establishing a habit of making sure your bills are paid on time can
go a long way toward raising your credit.
You should also investigate the possibility of applying through a
first-time home buyer's program. Many such programs are sponsored by
county, city or state governments and could provide you with a lower
interest rate. There are even some programs that are specially
customized for home buyers with damage credit or people who have trouble
coming up with a larger
At the same time, it is critical to make sure that you become
pre-approved for a mortgage. Do not confuse this with pre-qualification.
Pre-qualification does not bind the lender to providing you with a
mortgage loan because it is based on estimates not solid figures that
have been confirmed. When you become pre-approved you will know exactly
how much you can afford to pay for a home while also maintaining a
stronger negotiating position when the time comes to actually make an
offer on a home.
A huge mistake that some buyers tend to make is borrowing too much money
in the first place. Many people often think that they will earn more
money later on that will allow them to better afford the mortgage, but
this does not always happen. What actually happens is that they
experience a reduction in income and then the home that was only
marginally affordable before suddenly becomes completely unaffordable.
This can be avoided if you make sure you do not borrow too much in the
first place. Strive for hitting somewhere in the mid-range of what you
can actually afford instead of the top of the range or even above it to
avoid financial troubles.
Keep in mind as well that the mortgage note is not the only expense you
will have either. You must also make sure you can afford the cost of
homeowner association dues if they apply, homeowner's insurance,
maintenance and repairs, etc. These costs can quickly add up so make
sure you do not overextend yourself financially.
Before committing to a lender, be sure that you have shopped around in
order to obtain the best rates and terms for your mortgage loan. If you
are not sure what the prevailing interest rate is for someone with your
credit score, it can be far too easy for you to be taken advantage of
and you could easily end up paying far too much money on the cost of
purchasing your home.
Quicken Loans Inc. is the nationís largest online retail mortgage
lender and among the five largest overall retail home lenders in the
United States. The company closed a record $30 billion in retail
home loan volume across all states in 2011. Quicken Loans ranked #1
in customer satisfaction among all home mortgage originators in the
United States by J.D. Power and Associates in 2010 and 2011.
Finally, make sure you are fully prepared for the fees and costs
associated with actually buying a home, including
closing costs. These costs can easily amount to 2% or even more of the total home purchase
price. When it comes to closing costs, make sure you know what you are
paying for. If you review the settlement papers and you see a fee that
you are not certain about, do not hesitate to question it or you could
find yourself paying a small fortune in simple junk fees that are
Following these tips and guidelines can help you to avoid some of the
most common mortgage loans mistakes associated with purchasing home.