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Top 10 Mortgage Mistakes To Avoid
Buying a home and getting a mortgage is a long, complicated process that requires times and patience to complete. You will want to consult with professionals throughout the process to make it as straightforward as possible.
Whether this is your first time buying a home or your second, here are the top 10 mortgage mistakes to avoid:
Not Getting Pre-Approved
Getting pre-approved means that lenders have checked your credit, bank statements, and other important documentation to approve you for a specific loan amount. This will give you an advantage in the housing market.
Not Shopping Around For The Best Mortgage
Never settle for the first mortgage you come across! There are many different options out there that will fit your needs and budget. For example, there are private and government-backed loans, both with their own pros and cons, and all with different requirements and rates. Shop around for the best deal for you and don’t forget to lock your rate!
Changing Jobs Prior To Application
Have you changed jobs prior to applying for a mortgage? You may want to wait a bit longer to ensure that your job is stable. Lenders tend to be wary of borrowers who jump from job to job, as they see them as a financial risk.
Applying With Limited Employment History
Lenders want to know that you have stable employment before they lend you the money for a mortgage. If you have limited employment history, typically under 2 years, you may not be able to qualify. While you can apply for a mortgage with a 1 year history, it may be more difficult.
Applying With Poor Credit
To get a mortgage, you will need to have good credit. A good credit score will show lenders that you are financially responsible and can qualify for a good mortgage with lower rates. If your credit is poor, wait until it is more established to apply.
Not Saving Enough For A Down Payment
Before you ever think about applying for a mortgage, you will need to save up your money to put down a good down payment on a home. Not saving enough will put you at a disadvantage with other competing buyers who are able to offer more down. Aim for saving up at least 20% of the home price
Not Consulting With Your Lender
Always consult with your lender if you have a question about your mortgage. Keeping contact with your lender will not only help you understand the home buying process, but help you manage expectations.
Not Having Verifiable Assets Or Collateral
When you make a home loan, you will need to have verifiable assets and collateral that lenders can use in the event that you fall behind on your payments or foreclose. Liquid assets like stocks and savings accounts can be used for extra funds for emergencies, but if you don’t have these, you will be liquid asset poor.
Spending Big Before Applying
Did you just make a big purchase like a car before you applied for a mortgage? You may have to wait a little longer to get a mortgage. Lenders don’t like to see new, large purchases before you apply for a mortgage, as you have another big financial obligation.
Making Late Payments
When you have a mortgage you will need to make your monthly payments on time. Not doing so will result in late fees and possibly foreclosure. If you fall behind on payments talk to your lender to discuss your repayment options.