Not a lot of people have the financial means to buy a home in cash, and many actually rely on home loans. That’s all well and good, but the mortgage market is flooded with lenders who all seem to offer the “best rate,” and if you’re not careful enough to look out for mortgage mistakes to avoid, you can end up in a difficult financial situation.
First-time home buyers, in particular, are often carried away in the excitement of owning their first home that they often miss critical decisions that could help down the line. Below are four mortgage mistakes that new home buyers are likely to make—and which you can easily avoid if you proceed with caution.
4 Common Mortgage Mistakes to Avoid
Choosing the first lender right away
Although the first lender could actually give you the best option, that isn’t always the case and you can’t be totally sure you’re getting the best rates until you consider other lenders and do some comparison.
Lenders offer different rates and benefits. Sometimes, if you tell them about the other deals you’re considering, they can even come up with more attractive deals that will blow the others out of the water so that you’ll choose to work with them. Hence, before committing to a specific lender, it pays to be smart and ask around for quotes to make sure you really are getting the best deal out there.
Thinking that 20% down payment is the only option
A down payment of 20% of the home’s total value seems to be the norm and lenders will generally ask for that much at the very beginning. However, 20% down isn’t the only option as 20% isn’t necessary for every loan. Other loans, like the FHA loan, let buyers purchase a residential property for as low as 3% down, which could be a more workable option. However, take note that paying less down payment means higher mortgage payments later on. You could also be required to pay for Private Mortgage Insurance (PMI) until you’ve settled a certain amount of money.
Neglecting to get pre-approved
House hunting could be quite exciting and first-time home buyers often jump in right away without getting pre-approved for a mortgage first. What’s the point, you ask? Getting pre-approved grants buyers a written proof of how much money they’re permitted to borrow and which lender they’ll be borrowing from. This written proof is something lenders appreciate greatly, as it means there will be less waiting time for the buyer to secure a loan and that the deal is less likely to fall through because of a disapproved loan application.
Triggering a big change in credit score
When trying to secure a loan, the buyer’s credit score is a key factor that will determine if the lender will approve the loan application or not. If there’s a huge negative change in your credit score, the lender may reject your application and even revoke your pre-approval.
To ensure your credit score doesn’t change drastically, be careful with late payments, the amount of credit you’re using, incurring large debts, and inquiries related to a new credit card application as all these can affect your credit score.
Let Las Vegas Real Estate (LVRE) help you in securing your first home so that you won’t have to worry about the common mortgage mistakes discussed above. We’re a trusted broker in Las Vegas and with our years of experience in the industry, we’re confident that our real estate agents can help you find and own your dream home with minimum fuss.