[vc_row][vc_column][vc_column_text]5 Most Common Mistakes When Taking Out a Mortgage
If you’re ready to buy a home, it’s tempting to rush into the process. Buying a home is an incredibly exciting prospect. That excitement will mount with each new home you consider, as well. The problem is that getting carried away can lead to serious mistakes in the mortgage process that will cost you big in the long run. Let’s look at some of the most common mistakes buyers make when taking out a mortgage, and how you can avoid them.
- Taking on Additional Debt
It’s crucial that you avoid applying for any loans or credit cards before or during the process of obtaining a mortgage. With every application for credit, the risk you represent to a lender increases. You want to appear as low-risk as possible in order to ensure a reasonable interest rate on your mortgage. In some instances, this can actually destroy your eligibility for a mortgage with that particular lender.
- Not Knowing the Housing Market
The US real estate market moves in a cyclical pattern, with regular highs and lows. However, the cycle varies in different areas of the country. In addition to following national real estate market trends, you also need to know what the market is like in your specific geographic area, as well as neighboring areas. By following these trends, you can make smart decisions about buying a home, or holding off until the atmosphere is more conducive to buyers, rather than sellers.
- Misjudging Your Ability to Pay
Estimating a mortgage payment can be tricky, and many would-be homeowners find themselves derailed here. You need to account for all aspects, including the principal, the interest on the loan, the taxes assessed, and the insurance that you’re required to carry to protect the lender’s investment. Most homeowners will only factor in the principal and interest in their payment estimates, and then forecast their ability to pay based on that. Unfortunately, that’s an erroneous number. The real payment could be significantly higher.
- Changing Jobs
Most aspiring homeowners realize that they must have a steady paycheck in order to be approved for a mortgage. However, changes in employment, even if you never actually miss a pay period, can be devastating to your efforts to buy a home. Lenders want to see stability. That means no (or very, very few) changes in your employment situation for the past several years. This is important as it speaks to your ability to repay the loan due to continued employment down the road. Simply put, the lender wants as much assurance as possible that you’re employed, and will remain employed for as long as possible.
- Not Shopping Around
The mortgage industry can be a confusing place for those with little experience with this type of lending. It can be tempting to simply go with the first lender that offers a mortgage, but that could lead to you paying thousands of dollars more over the life of your loan. It’s crucial to shop around for the right lender before signing on the dotted line. What you’re really looking for here is the lowest interest rate – even a half percentage point difference could mean thousands of dollars saved over time.
These are only a few of the common mistakes made when attempting to get a mortgage. New home buyers, and those who have been out of the market for some time, should exercise patience, ensure they’re covering all of their bases, and shop around for the right mortgage, and the right lender. Buying a home doesn’t have to be confusing or frustrating, and these tips will help ensure the smoothest possible route to homeownership.