Mortgage Mistakes to Avoid

Many people make some big mortgage mistakes when looking for a new home. Since many people can’t afford to buy a house in cash, you are not only house shopping, you are mortgage shopping, too. Here are some mistakes you want to avoid when looking for a mortgage to help you get the best possible rates.

1) Not checking your credit

The first thing that lenders will do is check your credit. This is why it is so important to check your credit report in advance, probably six months to a year before you apply for a mortgage, so you know your score and can do what you have to do to increase it. The better your score is, the better rates you will get. So pay down debt and dispute any errors on your report.

2) Job-Hopping

Lenders like to see steady employment to show a solid source of income. Lenders can see constant job changes as an inability to pay back your loan.

3) Not having enough for a down payment

20 percent down or more is needed to even qualify for most conventional mortgages. You need to have the money in the bank and available before you start shopping around for a loan.

4) Not getting pre-approved

This is one of the biggest mistakes people make. Would you go shopping without your wallet? When you are pre-approved you know how much money you qualify for and that will make house shopping a whole lot easier. When you aren’t pre-approved, you could end up wasting time looking at houses that you can’t afford, or when you find a great deal, you will be scrambling to find mortgage money.

5) Not shopping around

Every lender will offer different mortgage rates and terms. Don’t sign up for a mortgage without shopping around first.

6) Ignoring fees

Interest rate is not the only charge that will be on your mortgage, there are many other fees.

• Appraisal – the lender will hire a third-party appraiser, but you will pay for it
• Credit report fee – for checking your credit
• Loan origination fee – for starting a new loan
• Processing fee – to cover the cost of paperwork
• Underwriting fee – final analysis and approval
• Wire-transfer fee – for moving money around

It is estimated that fees will equal about three to five percent of you total loan. Make sure you get all of the fees in writing and negotiate them down.

7) Not locking in

Mortgage rates change often, sometimes daily. The rate you are quoted can change if you do not lock it in. Most lenders allow you to lock in a mortgage rate for 30 to 45 days.