How to Avoid the Most Common Mortgage Mistakes

written by

Jim Mucci

posted on

December 3, 2024

avoid common mortgage mistakes

Getting a good home loan is easier when you follow these simple steps. Talk to many banks to find the best deal. Look at your credit report to fix any wrong info. Think about all the money you'll need – not just the monthly cost. Save extra cash for fees and surprise costs. Keep your job and don't buy big items while you wait for your loan. This will help you get better loan terms and save money in the long run.

Shop Multiple Lenders

explore various loan options

When you want to buy a home, talk to many lenders. It's like shopping for the best price at different stores. Talk to at least three lenders – banks, credit unions, and loan helpers.

Look at each offer they give you. Check the rate they charge, the total cost, and what you pay to close the deal. Don't just look at one number. Ask about all the costs to borrow money.

Take these offers and show them to the lender you like best. Tell them you found better deals. They might give you a better price. This can save you lots of money over time.

Lenders know you'll ask for better deals, so don't be shy.

Check Your Credit Report First

Want to buy a house? First, look at your credit report. You can get free reports from three big credit companies: Experian, TransUnion, and Equifax. Visit AnnualCreditReport.com to get them. Look at each report with care.

Check if anything looks wrong. Did you pay off a debt that still shows as unpaid? See accounts you don't know about? These things can make it hard to get a home loan.

If you find mistakes, tell the credit companies right away. They must check your claim in 30 days. Don't wait to fix these issues. It can take a long time to make things right.

Banks will look at how you handle money. A good credit score helps you get better loan rates. Make sure old debts show as "paid."

Try to use less than a third of your credit card limits.

Consider All Loan Costs

evaluate total borrowing expenses

When you buy a home, it's not just about the monthly payment. You'll need money for other things too. First, you need cash to start – like your down payment and home check-up costs.

If you put down less than 20% of the home's price, you'll also need to pay for special insurance called PMI.

Your home will cost you money each month. You pay the bank for your loan. You also pay taxes on your home. You need insurance to protect your home too.

If you live in a community with rules, you might pay fees to help keep the area nice.

Get mortgage-smart in just 6 minutes

Get Mortgage Funding delivers easy-to-understand updates on home buying and financing options right to your inbox, so you can make informed decisions with confidence.

Subscription Form to Newsletter (Form no text uses Bricks ACSS Styling) Footer Sidebar

Each bank has different fees when they give you a loan. Ask for a form that shows all these costs. This helps you pick the best deal and know what you'll really pay.

Save Beyond The Down Payment

Buying a home needs more money than just the down payment. You'll need extra cash for things like home checks and paper work. These costs are about $2-5 for every $100 you borrow.

You'll also need money to move in, fix things up, and buy stuff for your new home.

Don't forget the costs that come every month. You'll pay taxes on your home and need to buy home insurance. Some homes have fees you pay to keep the area nice. You might need to pay extra insurance if your down payment was small.

Keep some money saved up for when things break or if you can't work. Try to save enough to pay for six months of house bills. This way, you won't be stuck with a nice house but no money in the bank.

Maintain Financial Stability During Application

financial stability application guidelines

When you're trying to buy a home, keep your money simple. Stay at your job. Don't open new credit cards. Keep spending the same way you always do.

Be careful with your bank account. Don't move big chunks of money in or out unless you can show why. Your bank needs to know where money comes from.

Wait to buy big things like sofas or cars until you have your home keys. Big purchases can hurt your chances of getting the home loan.

Need to make a big money move? Talk to your loan helper first. They'll tell you when it's OK and what papers you need.

Your bank will look at your money one more time before you get your home. Keep things steady until then.