5 Mistakes People Make When Choosing A Mortgage
Selecting a mortgage is one of the biggest financial decisions you will make during your lifetime. Most mortgages have a 30-year term, which means you’ll be making payments on it for many years. With hundreds of potential mortgage lenders, there are plenty of options out there. However, it is up to you to know what the best loan is for your needs.
To help you make that decision, avoid these five very common mistakes consumers have when obtaining a mortgage. Work closely with your lender to get into a loan you know is right for you.
#1: Your Shopping for a Home Before Your Mortgage
It is possible to find your dream home and then find a mortgage. However, doing this can set you up for problems. Often, lenders will do what it takes to get you into the home, assuming you meet basic credit qualifications. But, if you purchase a home that’s outside of your budget, chances are good it will be a struggle to pay for each month. Instead, shop for your mortgage first. Then, you’ll know what’s really in your budget.
#2: Not Asking for a Better Interest Rate
Most people know that interest rates on mortgages are critical factors to consider. However, when a bank offers you a loan with a specific rate, ask for a better one. This isn’t always possible, but there are a variety of programs available that could help you drop your interest rate fast.
#3: You’re Using an Online Lender Without Talking to Your Bank
There are plenty of mortgage lenders available today. Many of these national organizations gather your information, find a broker that fits your needs, and get you approved. However, your bank knows you. Your bank also has a strong relationship with you on a local basis. For this reason, they can often offer better terms and easier qualifications than a national lender.
#4: You Didn’t Work on Your Credit First
Credit scores are vital for qualifying for low-interest rate mortgages. Take the time to check your credit report. Verify it is accurate. Then, work to reduce your credit card debt. Be sure you don’t have any collections or judgments against you. And, make all of your payments on time. Small improvements in your credit score can create big benefits in the long term.
#5: Not Saving Enough of a Down Payment
Many loan programs do not require you to make a down payment. Or, they require just three percent. However, you can shave thousands of dollars off of the total cost of buying a home simply by having a down payment. The more you put down first, the lower your monthly payment will be, too.
Work closely with your lender before you actually apply. When you visit your local branch, for example, talk about what you need to get the best loan terms available. Your lender is there to help you.