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10 Common Mortgage Mistakes to Avoid
February 14, 2023 | Posted by: Saif Jasim
Buying a home is one of the biggest investments you'll ever make, and getting a mortgage is a crucial part of the process. Unfortunately, many first-time homebuyers make mistakes that can end up costing them thousands of dollars over the life of their loan. To help you avoid these costly errors, we've compiled a list of 10 common mortgage mistakes to avoid.
- Not Checking Your Credit Score
Your credit score is one of the most important factors in determining your mortgage rate. Before you apply for a mortgage, make sure to check your credit score and report for any errors or inaccuracies. You can get a free credit report from the major credit bureaus once a year.
- Not Getting Pre-Approved
Before you start shopping for a home, get pre-approved for a mortgage. This will give you an idea of how much you can afford to borrow and will show sellers that you're a serious buyer.
- Not Shopping Around for Lenders
Don't settle for the first lender you find. Shop around and compare rates from multiple lenders. When comparing rates, pay attention to the Annual Percentage Rate (APR), which includes both the interest rate and any fees associated with the loan.
- Not Understanding Your Loan Options
There are many types of mortgages available, and each has its own pros and cons. Make sure you understand the different loan options and choose the one that works best for your financial situation.
- Taking on More Debt Before Closing
Avoid taking on any new debt before closing on your mortgage. This can include opening a new credit card, buying a car, or making any major purchases. New debt can impact your credit score and debt-to-income ratio, which can affect your mortgage approval.
- Not Saving Enough for a Down Payment
A down payment is a percentage of the home's purchase price that you pay upfront. The larger your down payment, the less you'll need to borrow, which can help you secure a lower mortgage rate. Aim to save at least 20% of the purchase price.
- Not Accounting for Closing Costs
Closing costs are fees associated with the homebuying process, such as appraisal fees, title insurance, and attorney fees. Make sure to budget for these costs, which can range from 2% to 5% of the home's purchase price.
- Not Getting a Home Inspection
A home inspection is an essential part of the homebuying process. It can reveal any hidden issues with the home that could end up costing you money down the road. Make sure to get a thorough inspection before closing on your mortgage.
- Not Reading the Fine Print
Make sure to read and understand all the terms and conditions of your mortgage before signing on the dotted line. This includes understanding any fees, prepayment penalties, and adjustable-rate terms.
- Not Hiring a Mortgage Broker
A mortgage broker can be a valuable resource for first-time homebuyers. They can help you shop around for the best mortgage rate and can provide expert advice on the homebuying process. Mortgage brokers have access to multiple lenders and can help you find a loan that works for your unique financial situation. They can also help you understand the terms and conditions of your loan and can answer any questions you may have.
In conclusion, buying a home and getting a mortgage can be a complex and overwhelming process, but it doesn't have to be. By avoiding these common mortgage mistakes and enlisting the help of a mortgage broker, you can save yourself time, money, and stress in the long run. Remember to do your research, understand your options, and always read the fine print before signing any documents. With a little bit of effort and some expert advice, you can find the mortgage that works for you and your new home.