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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 down payment.

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.

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Quicken Loans - America's Home Loan Experts

Quicken Loans

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.

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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 completely unnecessary.

Following these tips and guidelines can help you to avoid some of the most common mortgage loans mistakes associated with purchasing home.



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