So you are all set and ready to purchase the home of your dreams. One thing you need to make sure that you have done your homework and you can’t assume you know everything about mortgages or it can and will cost you dearly. The following is a list of 5 mortgage mistakes you can make that can cost you an approval or can even cost you thousands of dollars.
Do you want to know one of the mortgage mistakes right out of the gate that can get you into a bad spot? This mistake would be not knowing your credit score or what is on your credit report. Since your interest rate can be determined in part by your credit score, it is your best interest to increase it any way you can as a higher score can only help you. What you can do is fix errors on your report or make changes that positively affect your credit score. You can read my article on credit scores and see that you can do a lot to help yourself out. The difference of 0.50% on an interest rate can end up costing you thousands of dollars over the course of the loan.
Just because you walk into the first lender you can think of and get approved doesn’t mean you are necessarily getting the best rate possible. This is one of the mortgage mistakes people make quite often. You want to make sure you shop around because you might be able to get a rate that is 0.25-0.50% less by doing your homework for the best possible lender.
There is a big difference between getting pre-qualified and getting pre-approved. Just walking around with a pre-qualification letter is asking for trouble if you are trying to get a loan as a thorough look into your credit worthiness hasn’t been done. You might find yourself getting denied a loan for a property you thought you had locked up. Going with a pre-approval can prevent mortgage mistakes from happening since your loan officer and possibly underwriting will go through your history to ensure you are credit worthy.
You got approved for a mortgage, but if you aren’t careful you could be in the wrong type of loan altogether. If you were just shopping for a loan for a desired payment you might very well have been put into an adjustable-rate mortgage or ARM. After the 3-7 year teaser period is up and the mortgage adjusts to the current market rates, you could see your monthly payment increase $100+. If your plans are to stay in your home for years and grow old there, there is no reason to take on an ARM and you are better suited for a fixed-rate mortgage. On the flip side, if you only plan on being in a home for 5 years or less then the right way for you would be an ARM as the fixed-rate mortgage will have a higher monthly payment for the short time you are there. Not knowing your loan is one of the mortgage mistakes you simply cannot make.
If you have the money to put down a significant down payment, then you should otherwise you may be making the final of the mortgage mistakes and that is you will be paying PMI (private mortgage insurance) or MIP (mortgage insurance premium). If you are getting a conventional loan, the closer to 20% you put down the better as the PMI will be taken off faster or it will never be on your loan to start. If you are getting an FHA loan then the closer to 20% you get the better so when you finally have the equity, you can refinance and get the MIP taken off. MIP won’t come off automatically, so you will need a refinance transaction to get this done.
As you can see there are many mortgage mistakes you can make if you aren’t careful or have trust in a experienced loan officer who has your well-being in mind. If you are looking for a professional who can navigate these waters for you, look no further. Reach out to me at 888-900-1020, email me at email@example.com, or vist www.loanconsultants.org.