Navigating the complex world of mortgages can be difficult. As a result, it’s easy to make mistakes when applying for a mortgage loan.
Here are some common mortgage mistakes First Time Home Buyers should try to avoid:
- Taking on a mortgage that is too big for you to handle. The mortgage you are qualified or preapproved for isn’t necessarily how much you can afford. Be sure to examine your budget and lifestyle to make sure that your mortgage payment–including any extras, such as mortgage insurance–is within your means.
- Neglecting to read the fine print. Before you sign any paperwork, make sure that you fully understand the terms of your mortgage loan and the costs associated with it. For example, are you are applying for an adjustable-rate mortgage? If so, it’s important to be aware of how and when the interest rate for the loan will adjust.
- Overlooking your credit. A positive credit history may not only make it easier to obtain a mortgage loan, but potentially could also result in a lender offering you a lower interest rate. Be sure to review your credit report and check it for inaccuracies. You may have to take the necessary steps to improve your credit history, such as paying your monthly bills on time and limiting credit inquiries on your credit report (which are made every time you apply for new credit).
- Putting down too little. While it is possible to obtain a mortgage with a minimal down payment, a larger down payment may help you get more attractive mortgage terms. In addition to requiring private mortgage insurance, lenders generally offer lower loan limits and higher interest rates to borrowers who have a down payment of less than 20% of a home’s purchase price.
- Forgetting to shop around. Be sure to shop around among various lenders and compare the types of loans offered, along with the costs and rates associated with those loans. Consider each lender’s customer service reputation as well.
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