Mortgage Mistakes to Avoid

It’s easy to get wrapped up in the excitement of house hunting. But before you jump in feet first, review these common mistakes.

For most of us, our home is the biggest purchase we will ever make and our mortgage is the biggest debt we’ll ever carry. This is why it’s important to avoid major mistakes that could cause you to pay more than necessary to or prevent your loan from closing.

To avoid unnecessary pitfalls, take a moment to review these potential mistakes:

Thinking the initial price is the true cost of homeownership.

It’s easy to think the price tag on your new home is what you agree to pay the seller. However, the true cost of homeownership isn’t that initial price tag. It is what your home will cost you over the life of your loan. This includes (but is not limited to):

  • Your down payment
  • The amount you borrow
  • The interest on what you borrow
  • Yearly taxes
  • Home repairs
  • Homeowner’s insurance
  • Water/Sewer/Electric

Among these items, yearly taxes are particularly important to take into account. Depending on where you live, each year they can add thousands of dollars to the cost of your home. Take a moment to review the property tax system in your city. This will help you see when and by how much the property tax on the home you’re considering could increase each year.

Failing to think about the future.

Living in the ‘now’ is great in a lot of aspects of life. It’s not so great when it comes to financing your mortgage. Things happen and life changes. In order to be prepared for whatever comes your way, it’s important to think about the future.

During the next decade of your life, what might happen? Is it possible you could lose your job, change industries, get married or have a baby? The goal is to position yourself so you can live comfortably during the good times and the bad.

What if your future goals include moving up the career ladder? That’s great! But, tread carefully. It’s unwise to plan your financing future on a potentially higher income.

Celebrating before the deal is done.

As excited as you may be about your new home, don’t assume the deal is done until the documents are signed and the keys are in your hands.

During the loan process, life is going to be a tad different. If you’re thinking about quitting your job, hold off. Lenders want to see a consistent record of employment. You’ll want to avoid opening new credit cards or placing major purchases on existing credit cards. Both of these actions could reduce the amount of the loan for which you qualify.

House hunting without getting preapproved.

Without getting preapproved, it’s nearly impossible to look at the right properties. This is true even if you have taken the time to look at your budget and determined what you can afford.

What you can afford and what your lender will approve you for aren’t typically going to be the same. Your loan officer will have to take into account your current income, debts and credit score.

Unless you are paying cash, house hunting without getting preapproved is like playing make-believe.

Have additional questions about mortgages? Contact Rob today.


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