Most Common Mortgage Mistakes and How to Avoid Them
Shopping for a house before a mortgage
It is more fun to look at homes than it is to talk about your finances. So that’s what a lot of first-time home buyers do:
They visit properties before learning how much they are able to borrow. Then, they are disappointed when they discover they were looking in the wrong price range (either too high or too low) or when they find the right home, but aren’t able to make an offer without pre-approval letter.
How to avoid this mistake:
Talk to a mortgage advisor about getting pre-approved for a loan before you start too seriously shop for a place. During pre-approval process mortgage expert will review your income and expenses, it can make your bid more competitive because you’ll be able to show sellers that you are financially ready.
Not checking credit report and correcting errors
If your credit report contains incorrect information, you might get an interest rate that’s higher than you deserve. That’s why it pays to make sure your credit report is accurate.
How to avoid this mistake:
You may request a free credit report each year from each of the three main credit bureaus. You may dispute any errors you find, or we can check your credit for free, perform professional review and help you improving your credit score.
Applying for additional credit before the sale is final
One day, you apply for a mortgage. A few weeks later, you close, or finalize, the loan and get the keys to
the house. The period between is critical: You want to leave your credit alone as much as possible. It is a
mistake to apply for a new credit card, buy merchandise on credit, or take out an auto loan before the
mortgage closes.
Not knowing whether to pay discount points
Mortgage discount points are fees you pay upfront to reduce your mortgage interest rate. Interest rate savings can add up to a lot of money over the life of a mortgage, and discount points are one way to gain those rate savings if you’re in the right position to purchase them.
How to avoid this mistake:
If making a minimal down payment is an accomplishment, the choice is simple: Don’t buy discount points. If you have enough cash on hand, the value of buying points depends on whether you plan to live in the home longer than the “break-even period.” That’s the time it takes for the upfront cost to be exceeded by the monthly savings you get from a lower interest rate.