Private mortgage insurance (PMI) can be an expensive requirement for your home loan, as it adds more to your monthly payment costs. This is a safeguard that your lender will take out to cover a portion of the amount you borrowed in case you default. Up Next: P.I.T.I.: Understanding The Parts Of Your Mortgage Payment […]
Pitfalls To Avoid When Getting A Home Loan
Beginning the process of purchasing a home is an exciting time. You are ready to invest in one of the biggest purchases of your life and settle down in a place of your own. Congratulations!
Before you plunge into the waters of homeownership, there are several pitfalls you should be aware of and know how to avoid to make the process less stressful for you:
Going Through The Process On Your Own
How hard can buying a home be? You just need to go to a lender, get approved for a home loan, find a home you like, and buy it. After all, hiring a Realtor only means spending more money. Right?
Buying a home is a lengthy and sometimes confusing process for both experienced and inexperienced buyers. It is essential that you find a professional Realtor who not only knows what they are doing, but will clearly walk you through the steps in finding a purchasing a home. Research and get recommendations before choosing.
Focusing Only On Monthly Payments
Don’t fall into the trap of thinking “If I can afford $800 in rent, I can afford a mortgage payment.” There are more costs involved than just your monthly payment that you need to take into account when saving for a home:
When reviewing your Good Faith Estimate, look for junk fees. Junk fees are charges that serve no purpose other than to create more revenue for the lender. In identifying and removing these charges, you can potentially save yourself thousands.
Thinking Bigger Is Better
Manage your expectations while searching for a home. While you may fall in love with that Tudor-style on the corner with the beautiful garden, it is most likely out of your price range. Prepare your budget carefully before applying for a home loan so you know how much to save up for both initial and future payments, as well as living expenses.
Using Your Savings As A Down Payment
Never deplete your savings account to finance your down payment! While you can get a lower monthly cost when putting a lot of money down on a home, taking most of the money out of your savings does not leave you with a financial cushion in case of an emergency like an illness.