When applying for a mortgage, even seemingly minor mistakes can derail the entire process. That’s why it is essential to avoid these common home loan errors.
First-time buyers, particularly those unfamiliar with the home buying process, often make these mistakes. By avoiding them, you can ensure your dream home purchase doesn’t turn into a nightmare.
1. Not comparing your options
Mortgages are an integral part of the home-buying process, providing many households with access to their dream homes. These loans may feature either fixed-rate or adjustable rate mortgages, with interest rates and terms determined by a borrower’s qualifications and credit history.
Though the loan process can be complex and time-consuming, there are steps you can take to make it less stressful. One of the most essential is avoiding common mortgage errors.
Comparing your options is a major mistake that could cost you money in the long run. Lenders want to know that you are serious about buying a home and can meet their financial requirements.
Boosting your credit score can be an effortless and free way to reduce the interest rate you pay on your mortgage. Doing so could potentially save you thousands of dollars over the life of the loan, making it well worth the effort. If you have any queries regarding the process, don’t hesitate to get in touch with a Vanderbilt Mortgage expert today! Whether applying for your first mortgage or looking to refinance, our knowledgeable team is ready to assist you.
2. Not paying attention to your creditworthiness
A high credit score will get you a better interest rate and reduce your monthly payments. Conversely, having low credit can result in getting higher than necessary rates or worse yet, being declined for mortgage approval. Therefore, it is essential to take care of your credit before applying for a mortgage – preferably long before. To do this effectively, verify the accuracy of all reports on file and repair any hidden errors or inconsistencies. A good credit score could save thousands of dollars over time while increasing the chances of getting into that dream home!
3. Not comparing your down payment options
One of the most crucial decisions in your home buying journey is how much money to put down on your new house. How much you choose will depend largely on your monthly housing budget and which loan program works best for you. While a large down payment may seem like a significant financial commitment at first glance, it will ultimately pay off with lower monthly payments and extra cash at closing.
Finding out your down payment options with mortgage lenders is the best way to narrow your choices and move closer to securing your dream home sooner. There are numerous mortgage products available on the market, each boasting various features and benefits. So be sure to ask for those most tempting deals and don’t be afraid to compare plans with other prospective homebuyers. You might just end up enjoying all of your hard work sooner than anticipated! Good luck! And remember: the most important decision in life is always trusting your gut instinct.
4. Not comparing your closing costs
Closing costs can be a significant component of your mortgage. They’re separate from the down payment, and many borrowers don’t realize they can save money by shopping around for lower fees or bargaining with lenders to reduce certain charges.
Lenders must provide you with a loan estimate and closing disclosure, both of which provide an extensive breakdown of your closing costs. The cost estimate will include fees related to the loan itself as well as third-party services necessary during the mortgage process.
Closing fees may include home appraisal and title search fees, as well as a recording fee for property taxes. They also cover lender fees and any prepaid items such as insurance that must be paid out-of-pocket before closing your loan.
If you don’t pay attention to these costs, they can add up quickly and significantly increase your out-of-pocket expenses. The good news is that many of these fees are negotiable, meaning you could potentially ask the seller to help cover some or all of them.
No matter where you purchase your home, closing costs will vary by market. Your real estate agent can assist with this task and there may also be state or local programs offering grants for first-time homebuyers to cover closing expenses.
Comparing offers from different lenders allows you to identify which options they provide for rolling closing costs into your loan. This could be an ideal option if you cannot afford to pay them out-of-pocket, or if you want to ensure you get the most competitive interest rate possible.
In 2021, the average closing costs for a single-family home increased 12.3% over the prior year to $6,827 – an indication of rising home prices across America.