5 Mortgage Mistakes to Avoid

Buying a home is likely one the biggest purchases you will ever make, and it can be both exciting and overwhelming. To make sure that the process goes as smoothly as possible and that you end up with the best mortgage option for your situation, here are five common mortgage mistakes you should avoid.

Mistake #1: Not checking your credit

You should know where your credit score stands before you start looking for a home or begin the mortgage process.  This is a common mortgage mistake that many homebuyers make, and it’s any easy one to avoid. Even if you think you have perfect credit, there may be issues or mistakes on your credit report that you are not aware of. A mistake on your credit report can seriously cost you in the long run. If there are mistakes on your report that make you look less appealing to lenders, it can prevent you from getting the best rate possible. This means you could be paying much more than you should on your mortgage each month.

Mistake #2: Not getting pre-approved

It’s important to get a mortgage pre-approval because it gives you a guideline on what you can spend and will reveal any problems that could prevent you from getting a loan.  Getting pre-approved before you start shopping for a home ensures that you can actually qualify for financing. You will have a clear understanding of how much home you can afford so you won’t waste your time looking at houses out of your price range. Being pre-approved also allows you to act quickly when you find the perfect home and can make your offer more appealing to the seller.

Mistake #3: Not sticking to your budget

We all want to move into a dream home, but the dream can quickly turn into a nightmare if you bite off more than you can chew. Understand how much you can afford and create a budget before you start looking for a home. With the new qualified mortgage rules in place, it’s a lot more difficult to over-borrow, but it is still important to be aware of your long term financial goals to make sure you don’t get in over your head. A lender will tell you what you qualify to borrow, but you should decide what you can comfortably afford given your other financial goals

Mistake #4: Not considering all loan options

Make sure you understand the pros and cons of all of your financing options. Some people automatically avoid certain loan products because they don’t understand how they work, and they could be missing out on an option that would work well for them. To make sure you choose best the loan option for your needs and financial situation, do some research and talk to a reputable lender. There are a number of great programs out there that you may not even be aware of, and a lender can help you understand which one is the best choice for you.

Mistake #5: Forgetting about closing costs

In addition to a down payment, you will also have to pay closing costs to finalize your loan. This can be a substantial amount of money, so it’s important to plan ahead and be aware of the amount you will likely have to bring to the table. Make sure you have budgeted for these fees in advance, so they don’t catch you by surprise.