Avoiding mortgage mistakes when preparing to purchase a home is one of the most important items you can focus on. With the effort and energy that will be put in to find the right home for you, ensuring you have properly prepared financially can reduce stress and provide strength in your quest. This article identifies nine items for you to review to assist you with building a strong mortgage application and avoid mortgage mistakes. From knowing your credit score to choosing the right professionals and comparing products and understanding the fine print on the mortgage documents you can prepare and reduce any hold ups with your paperwork.
Mortgage Mistakes: Items for Attention
Know Your Credit Score:
A credit score is a 3-digit number that tells lenders how responsible you are with money. This helps lenders determine how much to charge you for credit or a loan. A good credit score will help you qualify for the best rates if you need a car loan, apply for a credit card or bank loan. A good credit history is important, it shows lenders you are reliable and will repay the loan. A bad credit score could mean you don’t qualify for a mortgage and will pay a higher interest rate. Your credit score is constantly being updated to reflect the way you use money.
New Credit Cards:
Opening new credit cards or making big purchases on credit lines before and during the loan application process can hurt your credit score. Every time you apply for credit, a credit check is performed. And they affect your credit score. Wait until after the loan is closed to avoid this mortgage mistake.
Pre-approval is when a potential mortgage lender looks at your finances to find out the maximum amount they will lend you and what interest rate. Pre-approval shows you the cost of house you can afford; enables you can put an offer on the table ASAP! Pre-approval also locks in the interest rate for 60 to 120 days. Getting pre-approved can save you thousands in interest charges.
Compare Mortgage Products:
Shop around and see what kind of mortgage you can get with banks, trust companies, and mortgage brokers. The big banks will only tell you which products they provide. A mortgage broker can have access to hundreds of lenders and many can specialize in lending to those who have bruised credit, have filed for bankruptcy, are self-employed, have unreliable pay, or earn a lot from commission. So comparison shop.
“Season” Your Assets:
Lenders want to know that you can pay your mortgage. Seasoned assets are deposits that have been in your bank account for at least a couple of months. Lenders require a detailed paper trail so that they know exactly where your assets are coming from. Having a relative transfer money into your account right before applying for a loan is a mortgage mistake with a red flag attached to it.
Underestimating the Cost of Home Ownership:
Ignoring the true cost of home ownership is mortgage mistake that could cost you greatly! Home ownership is more than just monthly mortgage payments. Property taxes, maintenance, home insurance, condo fees, utility bills, and home furnishings total the monthly costs. Another factor to consider is rising interest rates; 17 per cent of Canadians fail to take into account the possibility of climbing interest rates when buying a home. Ignoring monthly costs or exaggerating income could end up in bankruptcy or foreclosure.
Don’t rush a big commitment or feel pressured into make a decision that is going to impact your finances and lifestyle. Leave enough time to remove financing conditions and set a realistic closing date
Understand the Fine Print:
It’s your responsibility to know the terms of your mortgage. Make sure you understand the terms you are agreeing to. If you don’t, it could cost you fines and penalties, in the thousands of dollars. The fine print can affect everything.
Choose the Right Mortgage Professionals:
The right mortgage professional will be looking out for your best interest not that of the lending institution, which is a mortgage mistake no one wants to deal with. That’s why it’s important to look for a mortgage professional who is both licensed and independent. A private mortgage broker will help you find a lender who offers you the best financial products with the best rates and terms.
Once you’ve found your dream home, your mortgage professional will negotiate on your behalf to get you the best mortgage rate possible. They also can help you find the best way to pay off your loan quickly and reduce interest payments.
knowing your credit score, waiting to open new lines of credit, getting pre-approved for a mortgage after shopping for the right product with the right professional while preparing your assets will put you way ahead in the home buying process by avoiding mortgage mistakes that can slow or even halt the processing of your mortgage application. Additionally, understanding the full cost of home ownership and being sure to understand the fine print on the documents is Key to your financial future. And be sure to allow enough time for everything to fall into place without rushing the mortgage process. Follow these guidelines and you just might find the home buying process to be enjoyable.
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