Typically, you would find many tips on how
you can purchase your dream home. However, these tips and
articles forget one major aspect – the financial mistakes
that you can make. There aren’t many sources that would
educate you about things that you should not do.
1. The Wrong Mortgage:
The biggest mistake that you can make is choosing the wrong
mortgage. Even with various refinancing options available
today, the penalties (higher interest rate & prepayment
penalties) that you pay by selecting a wrong mortgage are
heavy even if it is for a short time period. It would be prudent
to analyze the different options available, compare each one
side – by- side and consider what would happen in the
worst-case scenario.
2. Choosing a lender recommended by your Realtor.
It is nice if your realtor is aware of the various lenders.
That said he is not a financial expert and may not be working
in the best interest for you. It is a simple principle –
he gets his commission only if you close and he suggests to
you the lender which will surely close the loan. However,
this lender may not be offering you the best rates or fees.
3. Not shopping around for rates and terms
There is nothing worst than not shopping around for rates.
If you select the first loan offer you find then you may find
yourself paying thousands of dollars more than you need to.
Not only should you consider the interest rate, you should
also assess the closing costs, mortgage terms and condition.
4. Not looking for first-time home buyers’ programs
There are several programs being offered by the state, county
or city governments to the first time home buyers. These programs
offer better interest rates and terms. This can help you save
thousands over the lifetime of your loan.
5. Credit taken and credit scores:
Credit has the biggest impact on your mortgage. Having a good
credit score is very essential to qualify and get a good interest
rate. A lender would assess two aspects of your credit –
how much can you borrow and how timely do you repay. Having
too much credit would cause similar effect as having bad or
no credit. It would be prudent not make any big ticket purchases
until after you buy your house.
6. Inaccurate information in Your Loan Application:
Nothing can spoil your case as much as lying about your income
on a mortgage application. This is considered as a federal
offense. Although, the lenders may not press charges against
you – you may be liable to pay a higher interest rate
or at time the contract may be terminated, leaving you liable
to pay the entire loan amount immediately. It is always prudent
to file accurate information and insist on the loan application
to be completed by the lender too, before you sign and submit
the document.
7. Borrowing too much money
A common error that most people do is borrowing to the highest
limit possible considering that they would have increased
income in the future to support these huge loans. However,
many first-time home-owners are unaware of the expenses involved
in homeownership such as mortgage payments, property taxes
and homeowners’ insurance, higher bills for utilities,
