3 Common Mistakes to Avoid When Taking Out a Mortgage
Buying a home is likely the largest purchase you’ll ever make - get the facts before you commit
A recent mortgage survey conducted by Freeandclear found that almost half of respondents said they had regrets about how they handled the mortgage process, with 32 percent finding it overly complicated and stressful. A key factor in this is that half of prospective home buyers don’t understand essential mortgage information.
Equip yourself with the information you need - so you can make the process as smooth as possible - and end up with a home you love, at a price you can afford. Here are 3 mistakes to look out for.
Mistake #1: Not understanding basic terms
Start shopping around for a mortgage and there are suddenly so many confusing acronyms and industry jargon thrown your way - FHA loans, ARMs, fixed rate - enough lingo to make anyone feel overwhelmed. Familiarize yourself with these terms to get a better idea of what options are out there and which specific loan fits your financial situation.
Alternative lenders like Quicken Loans start the application process online and then assign dedicated mortgage brokers to every case, ensuring every borrower is fully aware of the different loan products. To avoid any future surprises, it also helps to ask your loan advisor to go through worst case scenarios - for example, weighing the cost benefit an adjustable rate versus a fixed rate mortgage depending on how long you plan to live in your home and how risk averse you are.
Mistake #2: Not Shopping Around
Finding the right mortgage lender is the most important step in the homebuying process. So it’s all the more shocking to find that around half of homebuyers in the US don't comparison shop for mortgages. Many buyers don’t realize that lender fees are negotiable and can vary by lender. Reaching out to several lenders and comparing rates and fees can save borrowers thousands of dollars over the lifetime of the loan.
It’s recommended to obtain at least three different quotes before making a final decision. This isn’t as time consuming as it seems. Loan networks like RefiRateGuide allow borrowers to submit a loan request and compare personalized rates and fees from hundreds of vetted lenders.
These new kinds of networks have introduced convenience and transparency to the lending process – allowing potential homeowners to apply in minutes, compare rates at a glance, and get a clearer picture of all relevant options.
Mistake #3: Skipping the Preapproval
What you think you can afford and what the bank is willing to lend you may not match up, (especially if you have poor credit or unstable income). A common mistake made by new homeowners is to start looking at houses before getting pre-approved. The last thing you want is to fall in lust with a home, only to later learn that you can’t afford it.
When you get pre-approved, the lender will tell you how much of a loan you can expect to receive and what type of payments you can expect. It’s not written in stone of course, but it can give you a good idea of what types of houses are in your budget.
Also, once you’ve been pre-approved, you can show that to a potential seller, in order to show them that you are serious and also able to purchase the home. The seller will know that your financing isn’t merely theoretical, and that once you’re ready to sign on the dotted line, you’ve got a lender who will put up the mortgage.
Get pre-approved, and get rid of the uncertainty.
So What Now?
It bears repeating - buying a house is a big decision, and one that should be made wisely. Consider your income, your expenses, and your budget, and start shopping around with lenders to find the best deal for you.
And if you want to take that search for the best mortgage rate visit Quicken Loans for more information, and to easily apply online.