10 Mortgage Mistakes You Must Avoid

Kishan Thakkar K

Introduction

Home buying process can be one of the challenging. A mortgage is one of the huge financial responsibilities. Your mortgage will be with you for next ten to thirty years. When buying the home, these are top mortgage mistakes to avoid.

1. Ignoring mortgage rates

The majority of the home-buyers are unaware of the fact that the mortgage rates changes throughout the day. The loan tenure for home-buying is typically a long-term process. Even the smallest variation in a mortgage rate affects your finances in the long run.

Do your homework before finalizing the lender/financial institution, talk to different lenders. Make sure that you compare the same loan amount.

2. Assuming all lenders rates are the same

The services offered by the lenders depend on various factors such as loan programs, calculation of APR, and cost of services. Before choosing the lender, make sure they are a reputable company and have adequate experience in the field, and have a good review.

Before finalizing the lender, do compare the mortgage rates, that are available in the public domain. 

Click here *Changes in mortgage rates and how they affect you* (previous article)

3. Not reading the documents

When you go to the bank to sign the documents, go through all the papers and read all the documents carefully. It is __ that you will not understand few confusing and unique terms written in the document. Don’t hesitate to ask, if any questions arise. It is harmful if you hide your head in the sand.

4. Not understanding basic terms

In your home buying process, you might have heard the terms like FHA loans, Disbursement, Pre-EMI, Security, Sanction letter, etc in informal ways. As per the research, many people don’t know the meaning of these terms. Stay informed with basic mortgage terms before reaching out to a lender. Don’t be afraid to ask the questions to the lender or real estate agent. Reach out to us to get the help of the experts in the home buying process.

Click here to get more insights on home mortgage terminology

5. Not paying attention to the fees associated with getting a mortgage

This is the most common mistake that the home buyer makes. Mortgage rates vary from lender to lender, the same goes with the additional charges associated with the process. You must ask your lenders regarding all the related fees and have all the terms and conditions written. The most common fees such as origination fee, credit report fee, processing fee, and underwriting fee, vary significantly and can cost a huge amount of money.

6. Neglecting to consider the total costs of owning a home

There are many costs associated with buying a home. Many real estate agents or mortgage companies will not explain all the costs related to the home buying process. This cost includes the cost of paints and potential repairing of the house and other living expenses. Buyers who overlook the total costs of owning the home, often find themselves in vulnerable positions, especially if they are buying towards the top of the budget.

7. Not negotiating junk-fees

Many home-buyers complain that they are facing higher costs than that were estimated earlier. Buyers need to look out for the “junk fees” added to the regular costs, which are some of the fees that are unavoidable and obvious. Some lenders charge extra fees/charges for things like ‘document preparation’ or overcharging for obvious process You should try enquiring and challenging the junk fees.

8. Not reviewing credit reports

Having a good credit score plays a big role in the process of a mortgage loan. Start gathering knowledge on what impacts your credits scores. Review your credit score & pay off any pending bills as soon as you can. Any errors or disputes can lead to higher mortgage loans or rejection of loans in some cases. Buyers must be aware of the overall credit picture when buying a home.

9. Put no money or a small amount of money down

While purchasing a home with no money or a small amount of money may sound like a fantastic opportunity. Before making a decision, you need to compare the pros and cons of small down payment home loans. *external link here – https://www.rochesterrealestateblog.com/pros-cons-buying-home-small-down-payment/*

Lenders usually require at least 5% to 20% of the home purchase price as the down payment, and if you put down less than 20% of the down payment, be prepared to pay mortgage insurance and higher interest rates.

10. failing to get pre-approved

Not getting a mortgage pre-approval is a highly common mistake when buying a home. Many buyers confuse the pre-qualification and pre-approval. Getting a mortgage pre-approval is highly recommended. Sellers are unlikely to consider offers that don’t have pre-approval. Mortgage pre-approval is issued by a lender only after reviewing tax returns, credit scores, and other important financial information. 

Conclusion

It’s critical that as you’re trying to figure out which mortgage rate you must avoid. The blog about the mortgage mistakes that you should avoid should help you make an educated decision.

If you’re still unsure, it’s suggested that you discuss all of your options with an experienced real estate professional. For any queries and suggestions, write to us at contact@roodland.com.

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