3 Common Mortgage Mistakes You Shouldn’t Commit
First-time homebuyers want to have their home loan paperwork accurate and in order. Even minor errors during the loan application and review process can result in higher interest rates, or worse, denial of your loan.
To ensure that your mortgage lending in Tucson from Priority Lending goes smoothly, keep these common mortgage mistakes in mind and do your best to avoid them. There are many mortgage mistakes, small and large, to look out for, but these are three of the most common you will encounter.
1. Failing to Check Your Credit Report and Credit Score
Any prospective mortgage lender is guaranteed to check your credit report and credit score.. You don’t want to be surprised by debts or errors there; a bad credit report or low score spells disaster for your loan application. You are entitled to one free check of each credit report to the major credit bureaus:
Go through your credit report and make sure everything is accurate.
Your credit score comes from your credit report, but you need to check that independently. Many credit-monitoring apps will provide your credit score for free, as well as monitor your credit reports for any unusual activity.
2. Buying More House Than You Can Afford
A common mortgage mistake is first-time homebuyers failing to factor in all home buying costs when calculating what they can afford. Your monthly mortgage payment is only part of the total monthly household expenses. Other expenses to factor in include:
- Property taxes
- Maintenance and unexpected repairs
While you may qualify for a bigger home loan, buying a bigger home may not be a wise choice. Keep your monthly budget and expenses in mind when choosing a home, and avoid becoming “house poor” spending all your money on bills and home maintenance.
Keep in mind that your down payment is crucial for this budget. Not having a down payment can increase the likelihood of you struggling down the road. Consult your financial adviser or mortgage specialist to settle on the proper down payment to fit your budget and goals.
3. Choosing the Wrong Mortgage Loan
Once you know you are ready to move forward and apply for a mortgage, think about your home needs and finances. There are many types of mortgage loans, such as:
- 15-year loans
- 30-year loans
- Fixed-rate loans
Choosing the wrong mortgage loan could become a real burden in a few years, as many people discovered during the subprime mortgage crisis and the “housing bubble” collapse.
You need to read all the fine print and make sure you understand all the elements considered in a mortgage. From your debt-to-income ratio, to how a lender sets variable rates, to whether you can pay off your mortgage early without a penalty, you must consider all aspects as you shop for a mortgage loan.
When it comes to mortgage loans and home buying, there can be many mortgage mistakes along the way. Preparation, education, and sound advice are the keys to succeeding as you buy your first home. If you have questions about when to apply for mortgage loans, call the front desk at Priority Lending LLC at 520-231-1413 to learn more.