Buying a home is a tricky task. But despite all the challenges, it is one of the happiest milestones in your life. When buying a home, most people get too excited and forget to consider other important factors. The process of buying a home is not just about hunting for the right property. It’s equally important to understand your mortgage options and secure the right home loan. But many new homebuyers make serious mortgage mistakes that follow them for the life of their loan. For instance, if you get a $250,000 mortgage for 30 years, the slightest mistake and paying even 0.5% higher in interest can cost you over $25,000 over the life of the loan. This can jeopardize your financing and lead to frustration and tears. However, these mortgage mistakes can be easily avoided with careful planning.
If you want to move on the right path to homeownership, it is crucial to secure a financially sound mortgage. By avoiding a few simple mistakes, you could save thousands of dollars on a new home purchase. So, here are the top mortgages mistakes that you need to avoid while considering a home loan.
Not Reviewing Your Credit Score
When it comes to securing a mortgage, a good credit score can make a lot of difference. Your credit score will impact your approval for a mortgage loan. Your credit score may decrease rapidly for even one late payment. This score can go down quickly but can take several months of on-time payments to increase. The borrowers with low scores get sky-high interest rates while a higher score can help you secure better mortgage rates and terms. Typically, borrowers need at least a 620 to qualify for a conventional mortgage but this score requirement may vary by lender. So, make sure to review your credit report from each credit bureau to correct issues before shopping for your mortgage.
Not Saving For a Down Payment
If you don’t have money for a down payment, it can be an obstacle to getting a mortgage. Also, keeping too little amount for a down payment could make your loan more costly. This means that if you pay less down upfront, the more money you will pay in interest and fees over the life of the loan. In most cases, you need to have a down payment of between 5% and 20% to qualify for a conventional loan.
Not shopping for the best rates and terms
To find a loan that works best for you, it important to look around and compare multiple options. Just like you look at multiple homes before choosing the “perfect” one, likewise, you need to shop for the perfect mortgage. It makes sense to seek the assistance of a mortgage broker to get access to loans from different lenders. The same applicant can get different rates and terms from different lenders. If you get multiple options then you may get a much better interest rate and save thousands over the life of your loan.
In addition to the above-mentioned mistakes, there are also other mistakes like failing to understand how much you can afford and how mortgages work, as well as not getting preapproved for your mortgage and ignoring mortgage fees.