Having the ability to obtain a mortgage gives Americans the means to attain the goal of homeownership. However, in today’s market there are many regulations that lenders follow to make sure borrowers will be able to pay back the mortgage. Avoid these costly mortgage mistakes to make sure you not only make it through the strict underwriting policies, but also avoid any costly mistakes.
Not Doing Your Research
Conduct your own research to learn the mortgage market before agreeing to any loan terms. There is a wide range of loan optionsavailable and each borrower has a unique financial profile. Meet with an experienced lender to discuss your options and learn which loan products will work best for you.
Waiting for the Bottom
If you are holding out on purchasing a home until rates hit rock bottom, you probably will not see them much lower than they are now. Since September the Federal Reserve has been purchasing mortgage-backed-securities to improve interest rates and positively stimulate the economy. These purchases have contributed to historically low rates. If rates do decrease in the future, you will always have the option to refinance.
Not Checking Your Credit
If you allow your lender to check your credit when you apply for the loan, you can run into big problems if there are any errors on your report. Instead, check your credit report often to make sure any unforeseen errors do not pop up. It takes time to have the errors removed from your credit report that cause your score to drop. If you did not know, the poorer your credit score is, the higher your interest rate will be. Use AnnualCreditReport.com to obtain a copy of your credit report for free.
Not Shopping Around
In today’s mortgage market you can do your shopping online, over the phone, through banks, mortgage lenders, brokers and government agencies. Look into all of your options and detailed quotes from each of them. Mortgage brokers, such as Prospect Financial Group, Inc. have access to a wide range of wholesale lenders and do much of the shopping for you.
Not Understanding all the Costs
Fully examine the costs and fees that are associated with each quote you receive. Look beyond the annual percentage rate (ARP) at the closing costs, points, and other fees such as mortgage insurance that may be included with the loan. Homeowners will also be responsible for the costs of maintenance and repair, property taxes and costs to renovate and remodel the property.
Not Getting Pre-Qualified
Get pre-qualified for a mortgage loan before beginning your home search. This will give you an idea of what you can realistically afford when searching for a home. Do not wait until you fall in love with your dream house to find out you cannot approve it, instead find out what you can afford before-hand. When you are pre-qualified sellers will know that you are a serious buyer, giving you a competitive edge when negotiating housing prices.
Not Locking Your Rate
Even if you have been pre-qualified, interest rates can change. If interest rates increase you can potentially not afford as much as you had anticipated. If rates are low when you get your pre-qualification, consider locking in your interest rate while you complete your home search. Even though there will be a fee to lock the rate, this guarantees that you will have a certain rate once the loan is approved.
Buying More Than You Can Afford
Even if you have been pre-qualified for a certain amount, it does not mean you can necessarily afford it. Examine your budget to determine what expenses you have each month and where your money goes. Once you become a homeowner, you will not only be responsible for your monthly mortgage payments, but also for the cost of property taxes, home insurance, home maintenance and utilities. Only borrow what you can afford as you also want to have money on the side available for enjoyment and unexpected expenses.
Lying on Your Mortgage Application
Lying on your mortgage application is considered mortgage fraud, which is a felony that can result in up to a 1 million dollar fine, up to 30 years in federal prison or both. In addition, if your lender finds out you are lying on you application, your loan application will be cancelled and you can take a serious hit on your credit.
Second Guessing Yourself
Buying a home takes confidence. Find a Realtor and a lender that you trust. The right Realtor will be able to help you find and home that you can afford that meets your must haves and the right lender will be able to find you the best loan program for your financial situation. Know what you are looking for in a home and do not settle for less.