Mortgage Mistakes You Don’t Want to Make
There are many things to think about when getting a mortgage. But sometimes, people make mistakes that can cost them in the long run. Here are some of the most common mistakes people make when getting a mortgage.
9 common mistakes people make when getting a mortgage
#1. Not Getting Pre-Approved
One of the biggest mistakes people make is not getting pre-approved for a mortgage before they start looking for a home. This can cause a lot of problems down the road because you may end up finding a home that you can’t afford or you may end up overpaying for your home.
Getting pre-approved is a simple process and it will give you a much better idea of what you can afford. It’s also a good idea to get multiple pre-approvals from different lenders so that you can compare rates and terms.
#2. Not Shopping Around For the Best Rate
Another mistake people make is not shopping around for the best mortgage rate. There are a lot of different lenders out there and they all offer different rates. So, it’s important to shop around and compare rates before you decide on a lender.
You can use a site like Credible to compare mortgage rates from multiple lenders at once. This can save you a lot of time and hassle.
#3. Not Understanding the Loan Terms
When you get a mortgage, you will be given a lot of different loan documents to sign. It’s important that you understand all of the terms before you sign anything. Otherwise, you could end up with a loan that has terms that are not favorable to you.
For example, some loans have prepayment penalties which means that you will have to pay a fee if you pay off your loan early. So, make sure you understand all of the terms before you sign anything.
#4. Not Reading the Fine Print
Another mistake people make is not reading the fine print. This is especially true when it comes to mortgage documents. There is a lot of fine print in these documents and it’s important that you understand what it all means.
If you don’t understand something, make sure to ask your lender or a real estate attorney. Don’t just sign something because you think it’s what you’re supposed to do.
#5. Not Getting Homeowner’s Insurance
Another mistake people make is not getting homeowner’s insurance. This is something that is required by most lenders. So, if you don’t have it, you could end up being forced to get it anyway.
Homeowner’s insurance protects your home from damage or loss. So, it’s important to have it. Make sure to shop around and compare rates before you choose a policy.
#6. Not Getting an appraisal
If you’re getting a conventional mortgage, your lender will require an appraisal. This is to make sure that the home is worth the amount of money you’re borrowing.
If you don’t get an appraisal, you could end up paying more for your home than it’s actually worth. So, make sure to get one before you close on your loan.
#7. Not Having a Large Down Payment
Another mistake people make is not having a large enough down payment. A down payment is money you put down upfront when you purchase a home. The larger your down payment, the lower your monthly payments will be.
Ideally, you should aim for a down payment of 20% of the purchase price. But if you can’t afford that, there are programs available that can help you with a smaller down payment.
#8. Not Knowing Your Credit Score
Your credit score is one of the most important factors in getting a mortgage. So, it’s important to know what your credit score is before you apply for a loan.
You can get your credit score for free from a number of sources. Once you know your score, you can take steps to improve it if it’s not as high as you would like.
#9. Not Saving for Closing Costs
When you purchase a home, there are a number of closing costs that you will have to pay. These include things like the loan origination fee, the appraisal fee, and the title search fee.
These fees can add up quickly. So, it’s important to save for them in advance. That way, you won’t have to come up with the money all at once when you close on your loan.
These are just a few of the mistakes that people make when they’re getting a mortgage. If you avoid these mistakes, you will be in a much better position to get a loan that’s right for you.
Shop around and compare rates from multiple lenders before you choose one. And make sure you understand all of the terms of your loan before you sign anything.
If you do these things, you’ll be on your way to getting a great mortgage.