If you are in the process of purchasing a home and applying for a mortgage, you should know that there are several mistakes buyers tend to make. Buying a home can be stressful, especially if it is your first time and you do not know what to expect. One of the keys to securing a mortgage is to avoid mistakes just like these common ones.
Mistake #1: Not having a savings account.
You certainly do not want to spend all your savings on a down payment for a home. Your mortgage company wants to ensure that you have some cash reserved in the case of an emergency. Mortgage lenders want to see your reserves before determining whether or not you qualify for a mortgage, especially without insurance.
Mistake #2: Borrowing more than you are able to afford paying back.
You might be optimistic that your income will improve in the future, but you should taking on more than you can afford at this exact moment. It is also important to remember that other expenses change when you buy a home -- not only the mortgage. Remember that you will be paying for insurance, taxes, maintenance, and more each year.
Mistake #3: Not knowing your credit score.
You should know your credit score before you even approach a mortgage lender. You can receive three credit reports each year, one from each of the major bureaus. Make sure to fix potential errors ahead of time.
Mistake #4: Applying for other forms of credit.
Your credit is checked by the mortgage lender closely, so applying for a new credit card while you are trying to obtain a mortgage will be noticed. Avoid as many hard inquiries as possible in at least a year leading up to obtaining your loan. You should also avoid closing accounts in this last year, especially if they limit your available credit and thus lowering your score.
Mistake #5: Not shopping around for the right mortgage lender.
The earlier you find a mortgage lender, the better off you will be. In fact, getting pre-approved before you even find a home will allow you to make offers efficiently. Ask for advice from people you trust who have recently bought homes, for starters.
Owning your first home can be a great adventure or a launching point for the rest of your life, but keeping this advice in mind will help you avoid a major mistake.
Speak with a local lender for more information.