When Shopping for a Home Loan
The 7 biggest mistakes when getting a mortgage:
1) Not shopping for the best deal. Check with many lenders to compare interest rates and fees. Getting the right loan can save you hundreds of dollars a month. Call your financial institution or preferred lender and ask them to give you a pre-approval by having them review your income and credit rating in-depth so you may shop for a home with an affordable price in hand.
2) Spending too much money on a home. Calculate your total bills and determine an affordable monthly mortgage payment. Don’t let real estate agents repeatedly show you properties outside your price range and don’t work with loan officers who push you to borrow more than you are comfortable with.
3) Not doing your homework. If you know of which neighborhoods you are looking to buy try checking out sites like Zillow.com, Trulia.com, or ZipRealty.com and research home prices in that neighborhood. When you are ready to make an offer, be armed with knowledge of how much homes are selling for in that area and if you’re lucky (in a buyer’s market) you may be able to get more for the price than you originally thought (maybe getting them down in price or keeping that nice new fridge or light fixture the seller was planning to keep). The neat thing about ZipRealty.com is that you can view price history on homes that are on the MLS. Sometimes you can see they’ve lowered the price a few times….of course, in a buyer’s market that will happen more.
4) Taking out a risky loan. Taking out a risky loan could send your monthly payments into a danger zone financially. It is important to understand loan terms of adjustable rate mortgages and interest-only loans as these payments will grow in a few years or within a few months when and if rates adjustments change to a higher interest rate.
5) Fail to plan for the unexpected. Buy insurance for your home and the items within it. Fires and natural disasters such as earthquakes, tornados, hurricanes, floods can strike without warning. Have enough in savings to live without a paycheck for 3 to 6 months.
6) Not Appreciating how much owning a home costs. Be prepared to pay for things a landlord or some HOA (Home Owner Association) would cover. If the rook leaks, the pipes leak, or the water heater breaks…be prepared, these things aren’t cheap!
7) Finally, not protecting yourself. When looking for a loan, remember to look out for you and your family’s best needs. There will be a few lucky occasions you will meet a wonderful loan officer and/or real estate agent that is truly looking out for your best needs but not all are like that. Be careful. If you find a great servicer for your loan, stick with that person for future transactions. Great customer service, satisfaction and honesty are important qualities. Here are a few RED FLAGS to be aware of when working with a mortgage broker:
- Asking you to lie on a loan application or leave certain fields blank
- The loan value exceed the home value.Does the stated home value seem reasonable?
- The lender hires the appraiser. Get a copy of the appraisal, you’re entitled to it.
- Encouraging you to refinance the home and borrow more than the value of the home
- Claims that weak credit won’t affect the interest rate. Seems too good to be true…