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5 Mortgage Shopping Mistakes to Avoid

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by: No more debt !
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Date: Mon, 18 Aug 2014 Time: 12:52 AM
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Mortgage shopping requires a lot of analysis, diligence, composure, and know-how. You are about to invest money into a home and borrow a vast amount of money to do so; this is one of the largest buying purchases that you can ever make. Due to the intensity of the decision, it should come as no surprise that there are many ways to mess up.

 

Getting a good mortgage deal is more than finding one lender and signing on the dotted line of the first offer that is given to you; getting a good offer means avoiding these five grenades.

 

  1. 1.    Forgetting to check your credit report before you start. When you shop for a mortgage and contact lenders, or have a mortgage broker contact them, the lender will want to see your credit report & score. When they look at this information, they are looking to see how you handle debts, especially larger ones. If you have things on your report that say you are not a person who can handle debts, then they will likely deny your application or give you a deal that is not favorable (like a very high mortgage rate). Look over your report for any errors that need to be removed and if your score is not great, improve it.
  2. 2.    Applying for new credit. We apply for new credit, especially credit cards, all the time. Maybe you have not reached your limit on your current credit cards but you found one with fantastic rewards. Great. Just do not apply for it during your mortgage application process. Why? Well, when you apply for new credit such as credit cards or loans, it is marked on your credit history and this is a red flag to lenders. They see this and wonder why you are applying for more credit. "Why are they applying for more credit? Do they not have money? If that's the case, they can't afford a mortgage. Denied." They might not say it that way but that's essentially the thought process. Hold off on this until you officially get your mortgage.
  3. 3.    Settling on the first lender you find. This is a no-no. Even if the first lender you find is great and the deal is too, shop around. You will never know what else is out there unless you look. You will be unhappy if you sign your mortgage with the first lender you found and then realized a greater deal from someone else. If you don't want to deal with all the meetings, then hire a mortgage broker or online mortgage broker.
  4. 4.    Taking a mortgage that is beyond your budget. You have to remember that lenders are in the business to make money; they are not non-profits. Due to this, they will sometimes try to offer you the largest loan that you qualify for; however, this does not mean you can afford it. They base the offers off your gross income, not net income. Why does that matter? Well, you will be paying your mortgage payment from your net income, as well as your other bills and expenses.
  5. 5.    Signing documents you don't understand. Always ask what something means, you would hate to be surprised with your mortgage.

 

Remember to do your research and find out the answers to all of your questions. You can also contact a mortgage broker or lender and discuss things with them. It is better to take a bit longer and find out everything you need to know than rush into it and end up getting a mortgage that you can't afford.

About the Author

We are mortgage brokers that specialize in refinance and purchase loans. We service CA, CO, & VA. We make the process easy so refinance or buy through us today!


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