Buying a home is one of the largest investments made in one’s life. The last thing homebuyers want to do is make a mistake on their mortgage, especially one that winds up costing them more money than necessary. While the mortgage process can seem daunting at first, spending a little extra time researching the process can prevent avoidable errors. Of course, we still highly recommend working with a mortgage specialist from the very beginning to ensure the whole process goes smoothly. However, if you aren’t ready to make that phone call, here are four mortgage mistakes you definitely don’t want to make:
1. Mortgage Mistake #1: Not getting pre-approved
Pre-qualifying means that an overall financial picture -including income, debt and assets – has been provided to a lender. That lender can then use that information to tell you a ballpark amount for which you would be approved for a loan. This is a very simple step and generally can be done quickly and easily, possibly even over the phone. Because this step involves no credit checks or deep analysis of your true financial ability to buy a home, it’s also not a guarantee.
Pre- approval means taking the next step by completing a mortgage application and supplying all necessary paperwork regarding your finances and credit rating. Once pre-approved, the lender will then provide a more specific amount that is conditionally guaranteed.
2. Mortgage Mistake #2: Not shopping around
When was the last time you purchased something without price shopping it first? Most of us spend time shopping around before committing to buying. Make sure you do the same thing with your mortgage. Get quotes from multiple lenders for comparison. Just be sure you get them all within the same two week period to minimize any affect on your credit report.
3. Mortgage Mistake #3: Not having enough of a down payment
Yes, it is possible to buy a home with less than 20% down. But, since most lenders requite 20% for a down payment, you will most likely be forced to also purchase Private Mortgage Insurance (PMI) which can add up to $100 per month to your mortgage payment. While there is nothing wrong with PMI, it’s there to protect the lender and not the homeowner so it’s best to skip it altogether.
4. Mortgage Mistake #4: Getting in over your head
The two most common ways you can find your self in over your head is buying too much house and/or not understanding the true cost of home ownership. For example, buying a house at the top end of what you are pre-approved for without adequate savings means when other expenses come up like a car repair or emergency medical bill, you may not be prepared. Equally true, it’s important to understand the added cost home ownership brings with repairs, maintenance, and upgrades.
As we’ve already mentioned, the number one way to avoid these mortgage mistakes is to work with a reputable and trusted mortgage specialist. If you’d like to know who trust most, call DeSelms Real Estate today at 615.550.5565!