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6 COMMON MORTGAGE MISTAKES
Your credit is not fixed
Mortgage brokers are confounded by buyers who apply for a mortgage hoping their credit will allow them to ask for a loan.
Before you applying for a mortgage, obtain copies of your credit report and your FICO credit score. .
If you do this in advance, it will give you time to find errors in your report and remove them by the time you are ready to apply for a loan. You must also know the factors that hurt your score and do something about them, such as paying off an overdue bill or paying down credit card debt.
You do not look for buyers' programs
These programs, sponsored by state or city governments, usually offer better interest rates and terms than you find among private lenders. Some are tailored for people with damaged credit, while most can help people with little savings for a down payment.
Some of these resources are listed on the websites and you can also call the housing agencies to see their offers.
You do not get pre-approved for a loan
Many borrowers confuse the terms "pre-qualified" with "pre-approved." Pre-qualification is a process, where a lender tells you how much money you can borrow based on your income, what is your debt and how much cash you have for the down payment.
Getting pre-approval is a much more rigorous process and involves actually applying for a loan. You submit tax returns, pay stubs and other information. The lender checks the information and your credit. If everything is correct, the lender agrees in written form to make the loan. Home sellers and their agents give much more weight to offers made by buyers who already have a loan lined up.
You borrow too much money
Many people take out the biggest loan they can, hoping that their incomes will increase to make the payment. But few buyers have a clear idea of how expensive homeownership can be. You shell out more for mortgage payments than for rent, and you need to cover property taxes and insurance, higher bills for utilities, maintenance and repairs than a renter.
Lenders wish to let you overextend, knowing that you'll forgo vacations, other savings and new clothes rather than default on the mortgage.
Mortgage money is too easy to get. People tend to overbuy and that can stress family life.
You do not take into account rates and terms
Many borrowers with decent credit get stuck with loans meant for people with poor credit. "Subprime" loans are more profitable, so some brokers may push them.
If the borrower does not know the prevailing interest rates, they can pay more than they need to.
Even people with a few dings on their credit can often qualify for better loans than they are typically offered. Most of the people involved into government loan programs would pay less, if they did not use mortgages now offered by private-sector lenders.
You pay junk fees
Lenders can increase their profits adding a variety of fees. Some may be legitimate, some may be inflated and others may be invented. Lenders may ask for "document preparation," for instance, but as a matter of fact, a computer simply prepares a form. Or they may charge $150 for a credit check that cost them $15.
Junk fees are not to be asked when you are about to sign the loan papers. A mortgage broker can help you or you can call several lenders to compare their loans. Ask about the interest rate, the "points" charged to get that rate and any other fees the lender asks. Then you can compare terms.
After you have chosen a lender, you will be given an estimate of closing costs, which should include any fees charged. Ask about each fee,and try to discuss those that seem too much excessive.
If the lender does not want to negotiate, take the estimate to someone else. It can be argued about.
Unfortunately, this does not guarantee you from junk fees when time comes to sign the loan. Some borrowers complain that they face higher costs compared to originally estimated. You can try arguing junk fees at this point, but most likely you will have to pay the fees to get your loan.
6 COMMON MORTGAGE MISTAKES
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