Shopping for a mortgage is one of the most important financial tasks you will do. The mortgage you end up with will be one of the most significant factors in your financial health for the next 10, 15, or even 30 years. Take your time to be best prepared for homeownership and mortgage shopping. To help you get started, we have put together a list below of 5 common mortgage mistakes to avoid, and of course we are always here to help.
1. Overestimating what you can afford
One of the most common mortgage mistakes people make, especially first time homebuyers, is overestimating what they can afford. Don’t waste your time looking at homes you won’t be approved for, or applying for loans that you won’t qualify for.
Remember that your monthly mortgage payment will include more than the principal and interest payment. Your monthly fees will also include:
- Taxes
- Homeowner’s insurance
- Private mortgage insurance (PMI) if you put down less than 20%
- HOA fees
When you calculate your budget, make sure you take all of these things into account in order to make a decision you can comfortably afford for years to come.
2. Not checking for prepayment penalties
Another of the most common mortgage mistakes people make is not reading the fine print of their mortgage and assuming they can pay more on their loan. In some cases, there will be prepayment penalties attached to the loan. When you apply for a mortgage, make sure you speak with your loan officer about whether there is a prepayment penalty attached to the type of loan you are considering.
3. Skipping pre-approval
Especially in a real estate market that is highly competitive, sometimes called a seller’s market, skipping the pre-approval process is likely to cost you the home you love. Without pre-approval, you will likely see another buyer’s offer accepted before you can put your offer in.
Take the time to talk with a loan officer and get pre-approved to avoid one of the most common mortgage mistakes people make, and avoid falling in love with a house you won’t be able to purchase in time.
4. Opening new credit accounts during escrow
One of the most common mortgage mistakes people make is opening new credit accounts or making a large credit purchase while they are in escrow. This is a fatal mistake to make, as it often changes the credit score or debt-to-income ratio enough to affect the borrower’s eligibility.
Even if you are fully confident you can afford the purchase or be responsible with the new credit account, wait until after you have closed on your mortgage to make any moves in order to avoid forfeiting your mortgage approval.
5. Forgetting about the other costs of homeownership
Remember, in addition to your monthly mortgage payment (which will include more than just the principal and interest payment), you need to have a cushion available to cover miscellaneous costs of homeownership, including:
- Regular maintenance
- Furnishing the home
- Emergency repairs
- Lawn care and landscaping
- New appliances or appliance repair
- Renovation and updating
- Seasonal maintenance like sprinkler blowouts, holiday decor installation, gutter clearing, pool maintenance, or brush clearing
You have probably hear the term “house poor,” and it’s something you want to avoid. Even if you can pay your monthly payment, it is important to make sure you have enough of a financial buffer to support your lifestyle and continue to build your savings.
When you are ready to begin the pre-approval process, we are here to help. We have a team of knowledgeable and friendly loan officers to walk you through the process of becoming a homeowner. Contact us any time to get started!
Have more questions? Get pre-approved today with one of our trusted lenders throughout the Roseville CA area
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MORE FINANCIAL TIPS TO HELP GET YOU STARTED:
- How to Get Pre-Approved for a Mortgage
- Steps to Determining Your Mortgage Budget
- 5 Benefits of Buying a House with Good Credit
- The Most Important Steps Toward Buying Your First Home
- First Time Homebuyer Mistakes to Avoid
- What is the Minimum Down Payment for a House
