3 Mortgage Mistakes To Avoid
Purchasing a home is a major financial decision. Whether it's your first home or you have purchased more than one property in the past, it's important to take this decision seriously. A few small mistakes can be expensive in the long run. It's easy to focus solely on things like the interest rate and the monthly payment when looking into home loans. However, there is more to consider. Here are three mistakes that home buyers often make when looking into home loans.
Not Comparing Mortgage Companies
One of the biggest mistakes that you can make when looking for a mortgage is not comparing lenders. There are a variety of mortgage companies and lenders out there that offer home loans. There can be big differences between lenders in terms of what interest rates they are able to offer, what fees they charge, and what types of mortgages they offer. Some buyers may see substantial savings by simply shopping around. Despite the benefits of shopping around and looking at more than one lender, around 47 percent of home buyers do not compare lenders. Comparing lenders is one strategy that more home buyers need to adopt.
Not Comparing Loan Options
When it comes to mortgages, there is no one size fits all option. Failing to learn what types of loans are available is another major mortgage mistake. If you are not able to save up a large down payment or have a limited income, an FHA loan may be the best option for you. If you are a current or past member of the armed forces, a VA loan may offer savings or be easier to obtain. Adjustable-rate mortgages are something that many buyers avoid, however they work well if you intend to sell the home within a few years of purchase.
Borrowing Too Much
Another mortgage mistake to avoid is borrowing too much. Just because you qualify to borrow a certain amount, doesn't mean you should. A good basic guideline is that your mortgage payment should not cost more than 25 percent of your monthly income. However, in certain parts of the country with expensive real estate, this rule of thumb may not be realistic. Before getting a mortgage loan, it's important to crunch the numbers and make sure that it fits into your budget. You also must factor in additional costs, such as home maintenance and insurance premiums, when purchasing a home.
Getting a mortgage is a major financial decision. When looking into home loans it's important to shop around, know the difference between the different types of mortgages, and to avoid taking out a loan that you cannot afford.