7 costly and aggravating mortgage mistakes to avoid
A home loan is the biggest debt and monthly expense most of us will ever have.
That's why the 7 biggest mistakes borrowers make when shopping for a home loan can be so costly and aggravating.
Here's how to avoid them and be a happier home buyer now and more satisfied home owner down the road.
Mistake 1. Wondering if you paid too much for your home loan.
Finding the right combination of low interest rate and reasonable fees can shave thousands of dollars off your closing costs and monthly payments.
But you'll never know whether you got a great deal if you only get one quote from the bank down the street or the broker that arranged your last loan.
Our extensive database of mortgage rates is a good place to start. It allows you to quickly and easily compare the lowest available rates and fees from dozens of lenders.
Then you can ask three or four of those lenders for full estimates.
That way, you won't spend the next 10 years wondering if you overpaid for your home loan.
Mistake 2. Applying for a loan without checking your credit reports for errors.
Three out of every four credit reports contain wrong information that can make it more difficult to qualify for a loan or obtain the best possible interest rate.
To get a free credit report from each of the three major credit reporting bureaus, go to AnnualCreditReport.com. (Any other Web site that promotes "free credit reports" is lying. You'll have to pay.)
Each report explains how to challenge mistakes and get them fixed.
Mistake 3. Not getting preapproved for a home loan.
This is an important reality check -- and it's free.
A lender will look at your credit history, income, savings and debts, and decide how much you're qualified to borrow.
If you can't get preapproved, or can't preapproved for as much as you want to borrow, that's a big red flag. It's also something you want to know as early as possible in the house-buying process.
Our 5 easy steps to preapproval will walk you through the process and show you how simple it can be.
Mistake 4. Saddling yourself with payments you can't afford.
You can avoid that by looking at all of your bills and deciding how much you can comfortably spend. Include a realistic estimate for taxes, insurance and condo or association fees.
From that, calculate the amount that could be borrowed at prevailing mortgage rates. Add the size of the down payment and that should be your limit.
Don't let real estate agents repeatedly show you homes outside your price range or lenders push you to borrow more than you can afford.
Mistake 5. Blowing all of your savings on the down payment and closing costs.
Moving into a new home is expensive, and you'll need enough money to buy everything from furniture and curtains to lawn mowers and ladders.
Home repairs aren't cheap either, as you'll quickly discover when the central air conditioning conks out, the dishwasher spews soapy water on your kitchen floor or the roof starts to leak.
You should also have enough emergency savings to cover at least six months of living expense so that you won't default if you get laid off or become ill and can't work.
Mistake 6. Ignoring state programs for first-time home buyers.
Virtually every state offers some sort of assistance for first-time buyers.
From low-cost loans to down payment assistance and tax credits, these programs can lower monthly payments, provide cash for closing and help you seal the deal.
Most of these programs are limited to buyers who haven't owned a primary residence for three years, unless they are buying in targeted areas.
Most also have restrictions on how much money you can make and the price of the home you want to buy.
But don't ignore the help if you can qualify. Click here to learn more about state programs that can help you buy a home.
Mistake 7. Missing nasty surprises in your good faith estimate.
Lenders are required to provide borrowers with a good faith estimate that summarizes all of the key terms of your loan, from interest rates to closing costs.
Taking a careful look at your GFE allows you to confirm that the loan you're being promised is the loan you're actually getting.
If the terms aren't what you expected, if the fees are surprisingly high or if you can't locate the information you need, take those issues to your lender.
These 8 questions your GFE should answer can help you know exactly what you're getting into -- before it's too late.
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