Top 5 Mortgage Mistakes

Owning a home is a huge responsibility overall, but the biggest single homeowner responsibility is managing the mortgage payment. Mismanage your mortgage and you could risk not being a homeowner anymore. (Yikes!) That’s why it’s so important that you avoid the following mistakes when choosing a mortgage: #5 – Leaping before looking. It’s no secret that mortgage lenders weigh a potential lendee’s credit history heavily when deciding whether to offer the lendee a mortgage loan. Still, countless people meet with mortgage consultants without knowing where they stand credit-wise. Don’t do it. If your credit isn’t up to par, the meetings will be in vain because it’s highly unlikely the mortgage consultants would be able to offer you an affordable mortgage that won’t bite you in the buttocks in a few years; what’s worse is that, by meeting with various mortgage consultants, you will put unnecessary inquiries on your credit report—which reflect negatively on your credit! So, the lesson here is that the first step in obtaining a mortgage loan is to order your credit score and learn your what your credit rating is. Next, you do one of the following: (a) meet with a mortgage consultant if your credit is in good shape or (b) use your credit report to determine how you can improve your credit score and work on bettering it. #4 – Following the leader. Mortgages are often perceived to be complex and confusing. As a result, many people simply “do what they’re told” rather than learn what’s best for them and comparing that to the direction given by a mortgage consultant. Don’t be mindlessly herded towards a specific decision like that. Now, that’s not to say that you shouldn’t listen to your mortgage consultant, just that you should be knowledgeable enough to ask questions about the suggested option and other options. Make sure that you understand the “why” as well as the opportunities and risks of all the options you’re considering. #3 – Signing blind. Many homeowners stop asking questions as soon as they get word they’ve been approved for a mortgage; they forego delving into the details of the mortgage because they’re so elated about being approved. Don’t be that person! Take the time to discover and understand the terms of your mortgage before you sign on the dotted line. Review the Good Faith Estimate (GFE) statement#2 – Maxing out mortgage limits. Many homebuyers meet with a mortgage consultant and obtain a mortgage pre-approval. Then, they go out and look for a home based on how much they’ve been pre-approved for; they take the pre-approval amount to be what they can afford but in reality, that amount actually represents how much lenders are willing to loan you. So, as a general rule, remember that it’s never good to max out your mortgage limit. Stay conservative when shopping for homes. In fact, use an affordability calculator to determine how much of a mortgage loan you can handle without having to pinch pennies every month. Do this before you start home shopping. That way, you won’t be tempted to buy beyond your means. #1 – Settling instead of bargain hunting. Two mortgages may look alike, but that’s not necessarily the case. So as you’re comparing mortgage options, don’t just look at mortgage rates and the mortgage loan type. In addition to the mortgage rate and type, you should also compare mortgage terms, mortgage point options, mortgage underwriting fees, and mortgage broker fees. When you compare two or more loans side-by-side, you’ll see some clear-cut differences. Don’t just avoid one of the common mortgage mistakes above; avoid them all. If you do, you will be able to find a manageable mortgage, and not only become a homeowner, but stay one!

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