Helpful Mortgage Hints

There are many common mistakes people make when entering into a mortgage. This is mostly due to the lack of education most people have about mortgages. There are many types of mortgages with various types of terms, and this can be confusing for someone who is not familiar with the financial terms and legalities. We have listed six common mistakes people make when entering into a mortgage and provided options to avoid these mistakes.

Mistake 1 – Not searching for the best deal for you
We suggest you research different interest rates with several different lenders. Be sure to find out the fees associated with the mortgage and make sure there are no hidden costs. Searching for the best loan, rather than taking the first one you are approved for, can save you thousands of dollars over the life of your loan.

Mistake 2 – Applying for a loan without checking your credit history
Not checking your credit history for mistakes prior to applying for a loan can make it more difficult to qualify or can make your interest rate higher. will give you a full credit report containing any black marks that appear in your credit history with ways to resolve these issues.

Mistake 3 – Spending more than you can afford
Many people, especially first time home buyers, decide on a house and a mortgage that is too expensive for their monthly income. Only look at homes that are within your price limit. Calculate how much you can afford including taxes, insurance and any association fees you may have to pay. Be certain before accepting the loan that you will be able to make the monthly payments. The key is to not borrow more than you can afford to pay back!

cabins for sale north carolina mountainsMistake 4 – Not getting pre-approved for a loan
This is a free, easy process that will allow you to see how much money you are able to borrow. Of course, you do not have to borrow the full amount you are approved for – but if you do not qualify for the amount you are looking to borrow then you may want to rethink your price range. Also, getting pre-approved for the loan shows the seller you are good for the money and they may take your lower offer more seriously.

Mistake 5 – Not understanding the implications of your loan
Many people decide to take out interest-only loans because they initially offer lower monthly payments. However, many people who have taken out these loans are finding that their monthly payments go up sometimes only after a few months. Many people who opt for this type of loan find themselves in a difficult financial situation, and many are forced to foreclose. A good rule when looking for a lower monthly payment loan such as an interest-only loan is that if you can not afford payments on a 30-year fixed-rate loan then you are probably trying to borrow too much.

Mistake 6 – Agreeing to a pre-payment penalty
Many mortgage agencies have a prepayment penalty that can cost you thousands of dollars extra for paying off your loan early. Adjustable-rate mortgages, often given to people with poor credit, can cause your payments to go up and become unaffordable. With pre-payment penalties many people are prevented from being able to refinance or sell their home. Congress is in the process of regulating this procedure, but you should let your lender know that you do not want a pre-payment penalty in your mortgage.

Be sure to talk in depth with your real estate agent and your mortgage lender to make sure you are getting the best loan for you. If you do not understand something about your loan, be sure to ask questions so you fully understand it before signing the papers. This will help prevent you from making a poor financial decision that could affect you long term.