With all rules and regulations that you need to be aware of when getting a mortgage, it is very easy to make mistakes when trying to get a loan. Not only is there the risk of getting confused by all the documents and requirements of the lending institution, but making the wrong financial decision is a lot more common than you would like to think. In fact, a lot of people get fed up with the whole process and want to rush through so they can just be done with it – often leading to strong regrets down the line.
Below are 12 common mortgage mistakes that you really need to be aware of:
Mistake Nº 1: Not Considering Your Credit Score
One of the best ways of qualifying for the best rates is to have a good credit score. You do not want to ignore this as a good credit history shows lenders you can reliably repay the loan. Lenders might be wary of approving your mortgage application if you have bad credit. They can either raise the interest rate or tell you that you don’t qualify for a mortgage.
Mistake Nº 2: Taking the Entire Loan Amount that’s Offered by Your Lender
The lender will check whether you’re a good enough candidate for a loan and will try to determine the amount of loan that your income can handle. While you may be tempted to take that amount, bear in mind that the higher the mortgage, the higher the interest will be.
Mistake Nº 3: Opening New Credit Cards Right Before or During Your Application
Opening new credit cards during that period can easily hurt your credit score. Even making a big purchase on an existing credit line can affect your mortgage prospects. It would, therefore, be better to wait until your loan has been approved before making any major purchase.
Mistake Nº 4: Not Scout About
You can’t assume that the financial products offered by the one bank you visited are perfect for your needs. Shop around. Go to several banks, mortgage brokers and trust companies to see what they have to offer.
Mistake Nº 5: Thinking the Lowest Mortgage Rate Available Is Your Best Bet
Yes, you want the lowest mortgage rate. Low mortgage rates translate into less interest over time. But there’re other things you have to take into consideration, such as:
- Will you be charged penalties if you choose to pay more than your scheduled payment?
- What happens when you want to refinance before your loan term has ended?
Mistake Nº 6: Not Getting Pre-Approved
This mistake can lead to major regrets – there’s nothing more disappointing than putting an offer in on a property and then finding out you don’t qualify for financing. To avoid disappointment, consider getting pre-approved.
Mistake Nº 7: Not “Seasoning” Your Assets
You can’t just transfer a huge amount on your account just before you apply for a loan. Because lenders want to know that you can pay your mortgage, it would be a good idea to have your assets sit in your bank account for at least a couple of months.
Mistake Nº 8: Miscalculating the True Cost of Home Ownership
You must not ignore all of the other expenses that will come with the purchase of a home. In addition to monthly mortgage payments, you’ll also have to take into account that you’ll also have property taxes, maintenance, home insurance, condo fees, utility bills, and home furnishings to budget for. You might also have other financial goals and obligations, such as rebuilding your soon-to-be-depleted savings accounts, childcare costs, or repairing your car.
Mistake Nº 9: Rushing through the Process
Do not set tight deadlines. Buying a home is most likely the biggest purchase you’ll ever make and you must not rush such a big commitment. Especially since getting a mortgage is the most important part of the process.
Mistake Nº 10: Not Reading the Documents Properly
It is your responsibility to read the loan documents meticulously. We know mortgage papers and the fine print are not fun to read. But they are legal documents and failing to do so could cost you a lot in penalties and fines. You need to fully understand what you are agreeing to.
Mistake Nº 11: Choosing the Wrong Mortgage Professionals
For better security, find a mortgage professional who’s licensed and independent. You know you’ve found the right one when they look out for your best interest and help you find a lender who offers you the best financial products.
Mistake Nº 12: Believing that the Bigger, the Better
This mistake is very similar to the mistake nº 12. While you may know a certain brand or like the branch of another brand, it doesn’t mean that these brands offer more secure mortgages than any other lender. Just because it’s a big bank it doesn’t make it is more secure, nor does it mean the services they provide will be in your best interest.