Buying a home is one of the biggest decisions you will make in your life. It's important to avoid making mistakes that could cost you down the road. Here are the five most crucial mistakes to avoid before getting a mortgage.
Mistake 1: Not doing enough prep work on your credit score
It's no secret that a good credit score is one of the most critical factors for getting approved for a mortgage.
One way to improve your credit score is to do some pre-approval research. This means checking your credit score and history with different lenders, so you can better understand what range of scores they typically offer competitive mortgage rates to. This will help you determine which lender is best for you and give you a better idea of what you're eligible for.
If you have outstanding debt, you really need to get your finances in order before applying for a mortgage. There are dozens of options available, but debt consolidation is typically recommended for soon-to-be homeowners who need a boost to their credit scores. Use this debt loan calculator to help you determine if debt consolidation would work or if you need to try other payoff plans like the Snowball Method.
Mistake 2: Not shopping around for the best mortgage rates
One of the best things you can do when buying a home is shop around for the most competitive mortgage rates like California investment property loan. Not only will you save money on the interest you pay, but you could also qualify for better loan terms.
To find the best mortgage rates, use a mortgage calculator or visit a website specializing in mortgage rates. Be sure to compare rates from different lenders and shop around until you find a rate that's affordable for you.
Once you have an idea of what your rate could be, it’s time to start budgeting your future mortgage payments. If you're not sure how to calculate your monthly payments, talk to a mortgage broker or financial advisor. They can help you determine what type of mortgage is appropriate for your needs and what you can expect to pay every month.
Mistake 3: Not getting pre-approved for a mortgage
Getting pre-approved for a mortgage will not only give you a heads up on the amount of money you're eligible to borrow, but it can also help you lock in a good interest rate. If you don't get pre-approved, ask your lender if there are any available programs that could help you qualify for a mortgage with lower interest rates or look into government-backed loan programs.
Mistake 4: Not understanding your mortgage terms
If you're thinking of buying a home, you’ll need to do your homework and thoroughly understand what it is you've agreed to pay for.
Take time to understand the interest rate, the term of the loan, and any fees that may be associated with the loan. If you don't understand your mortgage terms, ask your lender or a qualified financial advisor for help. It could save you money in the long run.
Mistake 5: Not having enough money saved for a down payment
If you can't afford to put down a down payment, you may find it difficult to qualify for a mortgage and could end up paying more in interest over the life of the loan. Typically you should have around 20% of the purchase price saved up before you start looking for a mortgage. If you can't put 20% down, try to start saving as soon as possible and aim to have around 3-6 months of mortgage payments saved up.
The bottom line
By understanding your terms, locking in a good interest rate, and having enough saved for a down payment, you can ensure a stress-free home buying experience.