For most people, a mortgage is the largest financial commitment a person will make in their lifetime. Unfortunately, many home buyers have made dicey mortgage decisions on their way to owning homes. This article provides insights to readers on mortgage mistakes that home buyers should be wary of. They entail:
1. Ignoring your credit status
Many home buyers fail to pay keen attention to their credit status. It is a significant issue yet treated as very minor by prospective home buyers. Home buyers should accord priority to assessing their credit score through acquisition of a credit report. This is a crucial step that needs to be incorporated before applying for a mortgage and embarking on a journey of buying a home. There are a wide array of benefits accrued when buyers seek to first understand their credit status long before acquiring a mortgage. By knowing their credit scores, home buyers are in a position to improve their credit score if need be, making it easier to qualify for a mortgage.
2. The temptation to request for new credit
Requesting for new credit while applying for a loan has the potential to yield negative consequences on one’s credit score. In most cases, buyers adopt the mentality that lenders will not make a final assessment of their credit report before approving a mortgage. Nowadays, lenders are very keen to conduct thorough checks in order to verify if one is a suitable candidate for mortgage. Any changes detected in the credit report could delay the closing or lead to its failure completely. Home buyers are better off waiting until the purchase of a home before taking on any new debt.
3. Downplaying the housing costs
There is a prevailing misconception among quite a large section of home buyers that housing costs only focus entirely on mortgage payments. This is not the case though. Other costs that are part of housing costs should also be factored in. These costs include taxes, insurance, HOA or condo fees. There are also repairs and maintenance costs that come with homeownership. It is important to carefully analyze these expenses and determine if you have the financial resources necessary to own a home. Doing so prevents formulating a budget that is not a true reflection of all the costs to be incurred in purchasing a home.
4. Failure to get a pre-approval
The power of a potential home owner to purchase a home is to a great extent dependent on a pre-approval. Most home sellers won’t entertain an offer without a pre-approval letter. A pre-approval signifies that a lender has deemed the potential buyer qualified for a loan based on their credit history and employment status. A pre-approval also provides a preview of mortgage payments that a potential buyer is signing up for. Failure to obtain a pre-approval letter from a lender puts the buyer at a disadvantage from a standpoint of not being able to put together a solid offer with most sellers requirements.
5. Maintain your present job
One of the principles that governs mortgage is preserving the prevailing job. This guarantees getting a mortgage loan without hiccups. Assuming a new job rank destabilizes the process of acquiring the mortgage. A lender is forced to once again ascertain whether the new job offers stability to an individual. The process consumes time which would have been used to complete the process of getting a property.
6. Failure to find out the best mortgage rate in the market
It is always advisable to shop around for the best possible rate. The biggest mortgage mistake home buyers commit is ignoring the possibility of more favorable terms. There are possibilities of getting lower mortgage rates, even if it’s just a small fraction of a percent. Besides the mortgage rates, buyers should also shop around for lenders that provide more favorable closing costs fees. A lender might offer a lower interest rate, but have exorbitant closing cost fees.
7. Making large deposits
Home buyers lack adequate knowledge about issues surrounding mortgages. Making large deposits is one such issue which can undermine receiving a mortgage loan. A buyer should have sufficient monetary resources prior to seeking a mortgage. Any large deposits may trigger suspicion from the lender and might give a lender cause for concern that the home buyer does not have the financial capability to meet mortgage payments. Home buyers need to ensure doubts are not raised concerning the source of the money.
8. Evade mortgage complications
Simplicity is what makes a mortgage worth considering. This is an attribute home buyers should look out for when taking a mortgage. Bearing in mind that many mortgage packages might have hidden charges as much as they seem appealing. Such packages can result in complications for the homebuyer. Conventional, FHA and VA loans are the most suitable mortgage packages for most buyers.
9. Failure to lock your mortgage rate
Mortgage rates are not stable and keep on changing often. Home buyers should ensure the mortgage rate closes within the right timelines to avoid frustrations that may result from mortgage rate fluctuations. Unfortunately, homebuyers who did not lock in their rates before the recent interest rate increase by the Federal Reserve are now faced with higher mortgage rates than it was just a month ago.
10. Keenly have a look at mortgage documents
It is difficult for realtors to pinpoint any weakness in a mortgage loan deal. Their main purpose is to ensure a smooth process during acquisition of property. Any issues that a home buyer has that emanate from a mortgage lender is beyond their capacity. Before getting the mortgage and appending a signature to it, individuals should not shy away from reading keenly every bit of the mortgage document. This is crucial in verifying that the terms of the mortgage loan are presented accurately and pinpoint any mistakes noted. They should also raise queries with respect to mortgage matters that they do not fully comprehend.
In wrapping up, the above explored mortgage blunders should be suppressed by home buyers at all times. Homebuyers should also strive to make informed decisions regarding mortgage. They ought to consult financial experts to offer indispensable mortgage advice. Lastly, they should strive to be well endowed with mortgage knowledge to handle the process with utmost ease. This in the long run prevents wrong mortgage decisions and uncalled for financial crises.