5 Common Mistakes When Applying For A Mortgage
Buying a home is exciting, but it’s not without its challenges. The great thing about the process is that you can make it easier on yourself. By following certain steps and being exceptionally prepared, you can ease your way into the housing market. As a first-time buyer, there are many firsts that come with homeownership, and one of the most important things to start with is applying for a mortgage. To avoid any issues during your application process, keep in mind these five common mistakes.
Making credit mistakes that can hurt your score
First things first: check your credit score! If you have a good credit score, the process will likely go faster, but, that said, even a good credit score can raise red flags. It’s normal to want to do everything at once when buying a new home, like shopping for furniture or things for your home. However, it is best to hold off on these larger purchases until your mortgage rate has been approved, as they can make you look less trustworthy to a lender. If you are trying to raise your credit score, it’s best to avoid making any sudden financial decisions that involve credit. Instead, shop around for a lender who can help you move forward with a mortgage, regardless of your financial situation.
Not getting pre-approved for a mortgage
Skipping the pre-approval process for a mortgage is one of the easiest problems to avoid. Unless you are planning to buy your house in full, you will need to have a mortgage. The mistake that a lot of people make is that they start shopping, find their dream home for sale, and make an offer in haste only for the bank or a lender to turn them down. Getting pre-approved can keep the process fun and exciting, and it will save time in the long run.
Not taking the time to determine your true budget
Congratulations, you were just pre-approved for a mortgage! Now, to ensure you aren’t house poor after your purchase, you must first determine your true budget. Often the bank or lending institution will give you the full amount that they are willing to lend you, but this doesn’t mean it’s the amount you should actually spend. Being house poor means you can’t do things like save for retirement, travel, or even purchase furniture for your new space.
Another thing that can get you into this type of trouble is misunderstanding the true cost of owning a home. Houses for sale include property taxes and home insurance, not to mention the regular cost of utilities. By understanding all costs of homeownership, you can figure out the max amount you can comfortably spend on property investment, while also being able to live.
Accepting the first lender that offers you a loan
Contrary to popular opinion, you don’t have to go to a bank for pre-approval. There are countless other lending institutions and mortgage brokers willing and able to get you a better deal than what might be available to you at a big bank. That said, there is nothing wrong with seeking financing from a larger financial institution like a bank, as they are seasoned vets in this area and can guide you through the entire financial process of applying for and owning a home.
Failing to correct personal errors or reading the fine print
You’ve seen some townhouses for sale and you’re ready to purchase, but have you done all the necessary paperwork? Even if the answer is yes, be sure to go over everything before submitting for a mortgage or entering into buyer negotiations. Incorrect information, even a spelling error, can mean being turned down for financing.
If you buy a home, always read the fine print and know the terms of your mortgage. Failure to comply with all the stipulations of your mortgage can lead to steep fines, a financial surprise you might not have bargained for.
If you’re worried about the process or find you don’t have the time to look over the details, the best thing to do is to hire a great team. At Alex Irish & Associates, we can help you from the beginning to the end of the real estate process, whether you are a homebuyer or seller. Reach out today for more information on mortgage applications!