With the busiest housing market season of the year in full swing, it’s essential to be on your home buying game. Here are 6 major mortgage blunders to avoid to make sure you are in prime position for scoring the perfect property.
- Not Getting Pre-approved
In competitive markets like today with limited inventory, sellers will not even consider buyers that don’t have pre-approval for mortgage financing. It only takes a few minutes to fill out a pre-approval application. You will need to provide your lender with your basic identification information, bank statements for the past few months, tax returns from the past year, and info on any other assets or debts you have.
The lender will then give you a preliminary promise of financing. This will give you a good idea of how much house you can afford. This pre-approval letter will also let sellers know you are serious and are ready to close the deal if your offer is accepted.
- Not Checking Your Credit
Your lender will run a check of your credit when you apply for pre-approval. Your credit score and history are a huge component of whether or not your application is accepted and how low of an interest rate you’ll be offered. You can avoid any unpleasant surprises by checking your credit before you apply. You can do this for free with any of the three credit bureaus. If your score is lower than you expected, look for any mistakes or inaccuracies and report them. Sometimes just correcting mistakes can boost your score by several points. Other big things that affect your score are late payments, maxed out accounts, and the length of credit history.
- Not Locking in Your Rate
With today’s fluctuating interest rates, you could lose out on major savings by failing to lock in your rate. This is especially true if mortgage rates have been trending upward. Most rate locks are good for 30 days.
- Making a Major Purchase Before Closing
Once your offer is accepted and your loan is in process, making any large purchases or taking out new loans can negatively impact your application because it decreases your assets and increases your debt load. So, hold off on buying things like appliances or furniture for the new house, or taking out new loans like auto loans or credit card accounts until the mortgage closes.
- Skipping the Home Inspection
In order to get into your new house faster, you may be tempted to waive the home inspection, but do not skip this step. Home inspections give you a good picture of the true condition of the house, revealing any major problems with structure or systems. You want to go into this major purchase with your eyes wide open.
- Underestimating the Full Cost of Homeownership
While it is important to know how much your monthly payment is going to be, there is much more that goes into homeownership. Make sure any monthly payment estimates you receive include the cost of property taxes and homeowner's insurance. You should also have some reserves on hand to pay for things like house repairs and routine maintenance.
Becoming a homeowner is exciting but if you avoid these six mistakes the process can be much smoother for you.
If you have any questions, please give us a call today!