Buying Resources

Mortgage Mistakes to Avoid When Buying a Home

Mortgage Mistakes to avoid when buying a home in California. A mortgage is one of the largest financial responsibilities you’ll acquire throughout your life. Despite this, there are still some major mortgage mistakes many people make every day. If you’re interested in purchasing a home, you should do your best to avoid these potential pitfalls. Your mortgage will be with you for probably the next ten to thirty years, and requires a significant investment of time to negotiate properly.

One thing to know about the mortgage process is that there’s a lot of work to do, even if this is your second or third time doing it. It could be tempting to take a shortcut, like just going with your previous lender (you know them, they know you, so why not?). But without shopping around, you could miss out on better offers.

When buying a home, these are the top mortgage mistakes to avoid to have a pleasant home buying experience.

Mortgage Mistakes to Avoid – Check Your Credit First

You should always check your credit before you begin your pursuit of a home. Not checking your credit is a mortgage mistake that many home buyers can easily avoid but don’t! You may have issues with your credit that you didn’t expect, such as judgments in another state or late payments on accounts you forgot about.

If you check your credit early on, you’ll avoid nasty surprises down the line. Some issues with your credit will be able to be resolved before you begin applying for your mortgage loan. You can pull your credit for free from each of the three major credit agencies once a year. Keep in mind that credit mistakes on your report can have an effect on your score which ultimately can have some bearing on the rate you can negotiate with your lender.

Mortgage Mistakes to Avoid – Don’t Apply for Any New Credit

Taking on new debts are one of the biggest mortgage mistakes when buying a home. In fact, I have seen a few closings get delayed because of borrowers making a large purchase like a care before their closing! Applying for new credit can have a dramatic effect on your debt load and your credit score. If you make a major purchase, your mortgage loan could fall through in the final stages. Many prospective homeowners make the mistake of believing that their loan has already been guaranteed and that it will go through before the new credit hits their reports.

However, delays can occur, and your lender will check your credit report before final approval. Even a single extra credit check on your report could potentially affect your score enough to change your interest rate, even if it doesn’t result in the opening of a new line of credit. The mortgage industry has changed drastically over the last decade. Lenders are now far more cautious on who they give loans to. The lender will be very thorough when evaluating a new borrower. Don’t underestimate the scrutiny you will be under throughout the process. Making a major purchase is probably the #1 mortgage mistake made during the home buying process.

Mortgage Mistakes to Avoid – Don’t Underestimate Your Housing Payment

Your housing payment doesn’t just consist of your mortgage payment. Once you purchase your home, you’ll have to acquire homeowner’s insurance, pay property taxes and pay any homeowner’s association fees applicable. It’s critical that you consider these incidentals, as well as the repairs and maintenance you will have to do in your new home.

If you have been renting, you may not have needed to pay gas bills or water bills before, either. Regardless of the amount your bank approves you for, you should carefully go over your personal income and expenses to determine how much you can truly afford. Many homeowners don’t allocate enough for those expenses that just happen to “pop up” from time to time out of the blue. Most first-time home buyers don’t realize all the other expenses when purchasing home. If you are not careful, you could easily find yourself in the poor house without budgeting properly!

Mortgage Mistakes to Avoid – Don’t Make Any Large Deposits

Before you start the mortgage loan process, you should already have all of the funds you need to purchase your home. Any large deposits that you make will need to be tracked. Tracking by the mortgage company ensures that you do not receive money from other sources, such as private family loans or even gifts. Making large deposits is a common mortgage mistake that should be easy to avoid as long as you know it will create issues. Unfortunately, many buyers are not counseled well enough.

Mortgage lenders need to be assured that all of the money you’re putting towards your home (with some small exceptions) came from you and no one else. Remember lenders are going to scrutinize almost everything you do during the loan process!

Stay in Your Current Job – Don’t Change Jobs

Even if you’re moving to a position that has a higher rate of pay, changing positions in the middle of receiving a mortgage loan is almost never a good idea. Instead, ask your prospective employer if you can start after your closing date. Changing jobs can complicate the entire process, as your mortgage lender will need to reevaluate the stability of your position. Moving to another employer ranks right up there as one of the biggest mortgage blunders while trying to buy a home.

Mortgage Mistakes to Avoid – Always Get a Pre-Approval

A mortgage pre-approval is imperative because it gives you a guideline on what you can spend on a home and will reveal any potential issues that could prevent you from getting a home. It is important for you to understand that pre-qualification letters are not the same as pre-approval. There is a huge difference between being pre-qualified and being pre-approved for a mortgage.

A pre-qualification does not look at all of the aspects a pre-approval does and may not be as accurate. Most of the time when you get a pre-approval, the lender will verify your credit and employment. When these steps are taken a seller is going to feel better about your ability to purchase their home.

Most pre-qualification letters are not worth the paper they are written on as nothing has been verified. A hidden benefit to acquiring a pre-approval is that it will help you get your financial documentation in advance.

Not getting pre-approved is a relatively substantial mistake that could cost you the opportunity to get your dream home if other buyers are making an offer at the same time. Working as a real estate agent for the last thirty years, not getting pre-approved is the most common mortgage mistake made by home buyers. For some reason, there are many careless Realtors who do not take the time to read over their buyer’s mortgage letter to make sure it is a pre-approval and not a pre-qualification!

Mortgage Mistakes to Avoid – Always Shop Around

Some home buyers underestimate the difference just a fraction of a percent can make on their mortgage loan interest. You should always shop around to try to find the most favorable terms possible with your mortgage loan. To make the process easier, you can assemble a packet that already includes all of the information your first mortgage lender asked for regarding your pre-approval.

You can then forward this packet of assembled information to multiple mortgage lenders for a quote on their rates and terms. Throughout this process, you may want to inquire with both national and local lenders, as you can’t always predict which lenders will be able to give the most optimal rates.

Make sure when you are comparing mortgage programs you are doing it apples to apples. Points, closing costs, and other fees can have a dramatic impact on the overall cost of your loan. While one lender may have a cheaper rate, if the rest of the costs are sky high you may not be getting the best deal. Mortgage mistakes to avoid.

Keep Your Mortgage Simple

There are many exotic loan packages available, but many of them come with complications or catches. Keeping your mortgage simple is usually your best bet. When you introduce other types of mortgage loans, you end up with more restrictions and a higher possibility of failure. Conventional mortgage packages and standard alternative loans such as FHA loans and VA loans are usually all an individual should need. Your real estate professional can discuss your personal financial needs with you. Mortgage mistakes to avoid.

Always Read Your Documents and Disclosures

Mistakes can happen. While your real estate agent will do their best to protect you during the actual purchase of the property, what occurs with your mortgage loan will usually be entire between you and your lender. It’s not impossible for a mortgage lender to have inclusions within a loan that you hadn’t noticed or that hadn’t been adequately discussed and explained to you.

When you go to your bank to sign your documents, you should carefully read each page, and you shouldn’t be afraid to ask questions. The terminology used in loans can be very confusing and unique, and you aren’t expected to understand everything right away. Don’t make this careless mortgage mistake! This is an important mortgage mistakes to avoid.

Mortgage Mistakes to Avoid – Always Lock in Your Mortgage Rate

Mortgage rates fluctuate on a daily level. If you don’t lock your mortgage rate, it’s possible that you could be in for a surprise once you finalize your loan. If your mortgage loan takes an unusually long time to close, this difference could be relatively significant. This is particularly the case during periods when mortgage rates are going up quickly.

Mortgage loan rates are usually locked for a particular period, but you can extend the lock you have on your mortgage rate if your transaction is taking a while to close. While getting a mortgage loan may seem intimidating at first, it is a process that hundreds of people go through every day.

As long as you are careful and do the appropriate research, you should be okay. The most important thing to remember is to be knowledgeable about your personal financial situation, to not make any significant financial changes throughout the process and to educate yourself about your financial options.

Mortgage Mistakes to Avoid – Few More

Not learning about the process.
Applying without solid credit history.
Not getting pre-approved for a mortgage
Not shopping around for a low interest rate.
Failing to check your credit score
Opening new credit cards before applying or during the process.
Plundering your savings.
Running up credit cards.
Not seasoning your assets beforehand in a bank account
Changing jobs prior to loan application
Forgetting to lock your mortgage rate
Attempting to refinance after listing your home for sale
Waiting too long after seeing a good rate.
Starting a business.
Quitting your job.
Failing to compare loan products.
Putting too little or nothing down.
Not going with a VA loan if you qualify.
Failing to negotiate junk fees.
Not checking out first time home buyers program.
Not being realistic about what you can afford.
Not getting your mortgage paperwork moving.

Mortgage Mistakes to Avoid – Final Thoughts

I’ve put together a list of what I feel are the top 10 “mortgage mistakes” individuals should avoid if they’re planning to finance a new home purchase. Keeping all the above mortgage mistakes to avoid in mind will prepare you for a smooth real estate transaction and hopefully years of enjoyment in your new place. Buying a home is a decision that should be pondered and planned for some time before jumping in. By taking decisive action while you are preparing to buy and while you are going through the mortgage process, you can improve your chances of qualifying for the mortgage you want and finding a home that you will love.

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Thinking of selling your home? I have a passion for Real Estate and love to share my marketing expertise! I service Real Estate sales in the following California Towns: Artesia, Cerritos, Norwalk, Downey, Lakewood, Long Beach, Santa Fe Spring, Buena Park, Anaheim, Cypress, Stanton, Yorba Linda, Placentia, Orange, Anaheim Hills, Brea, Montebello, Whittier, Corona, Riverside, Lake Elsinore, Perris and San Bernardino.