How to Avoid these 10 Common Mortgage Mistakes

A woman who has learned how to avoid common home loan mistakes.

Buying a new home is exciting and one of the biggest of your lifetime. That’s why it’s crucial to be informed and follow the right steps so you can secure the best mortgage for you while steering clear of common mistakes. Here are tips on the “do’s” to avoiding common mortgage mistakes.

  • Get Pre-Approved.

    When you begin to search for a new home in Carson City, NV, you’ll want to get pre-approved for your mortgage. This tells lenders that you are serious about the process, and it also gives you a clear understanding of what you can afford. Plus, when you are ready to make an offer, a pre-approval letter could nudge you ahead of others who are also interested in the home.

  • Watch Your Finances.

    Once you begin the process of seeking a lender for a mortgage, your credit history and score will be highly scrutinized. You won’t want to take on new debt until you’ve closed on your home because it will negatively affect your credit score. This can affect you in a couple of ways: by lowering your creditworthiness, and by raising the potential interest rate on your loan.

  • Estimate Closing Costs.

    In addition to the cost of the home (and ultimately interest involved), there are many items that will need to be funded including fees, inspections, closing costs, taxes, HOA, repairs, and maintenance, etc. Be certain you have enough savings to cover all of these items.

  • Pay Attention to Your Credit Score.

    Your credit report will be an essential tool for lenders to determine if they want to grant you a mortgage. When you pay bills on time, make certain your report is error free, and keep your credit card balances low, you should be in a good credit space.

  • Consider Mortgage Insurance.

    Unless you have at least 20% down on your home, you will have to pay mortgage insurance (for most loan types). This type of insurance is designed to protect the lender if you end up defaulting on your loan. Mortgage insurance can be expensive, and it will be added to your monthly mortgage payment. Luckily, some types of loans allow you to cancel mortgage insurance once you’ve built up enough equity.

  • Plan for a Down Payment.

    Granted, there are loans available for those who don’t have any down payment on their new home, but generally, you will be looking at a much better position to be approved if you have around 20% of the cost of the home to put down. Not only are you indicating to the lender that you are invested in this opportunity, but you are also immediately increasing your equity and are much less likely to walk away from the investment.

  • Ask Questions and Fully Understand the Loan Conditions.

    Securing a mortgage loan takes time and can seem overwhelming, that’s why it’s important that you understand every aspect of it. Before you sit down to sign paperwork, ask all of the questions you need, so you understand all of the terms and phrases used. You might be unclear about APR, prepayment penalties, origination fees, appraisal fees, application fees, etc.

  • Postpone the Post-Closing Shopping Spree.

    Yes, it’s a sigh of relief when you’ve signed the paperwork and have closed on your house. However, you must resist paying for home improvements, furniture and other large purchases with your credit cards. Wait a few months so you can see what your monthly payments look like first, to avoid financial difficulties in the future.

  • Maintain Employment During the Process.

    One of the major factors considered when a lender gives you a mortgage loan is the stability of your employment. If you are thinking of changing jobs, it may be wise to do so after closing on your home as the lender may see this abrupt shift as an inability on your part to pay back the loan.

As it is, indeed, one of the biggest financial decisions you will make in your lifetime, it’s important that you proceed through the mortgage process with as much information available to you as possible. Knowing what to do but also what to avoid, could make the difference in the amount of time, effort and even the outcome of your homeownership status. We have exceptional Preferred Lenders available and ready to help you every step of the way.