10 Deadly Mistakes to Avoid When Applying For a Home Mortgage
By Frank Oakerson
Applying for a home mortgage goes well beyond filling out a few forms and awaiting approval for a conventional or jumbo loan. There are mistakes you must avoid when applying for a home mortgage and any one of the ten listed can wreak much havoc, even scuttle the loan. Let's take a look at potential mistakes and how you must avoid them to ensure that your mortgage is approved without a hitch.
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1. Getting pre-qualified, but not pre-approved for a home mortgage. No matter whether you are seeking a home that will be conventionally financed or one requiring a jumbo loan, getting pre-qualified by a realtor is a waste of everyone's time, while getting pre-approved by a Texas mortgage broker is many times better. Pre-qualification really does nothing, while pre-approval means that you have a loan in hand. Better yet: get pre-approved and have a letter of approval with you when shopping for a home.
2. Letting credit problems continue unabated. Did you know that you could get free copies of your credit report from each of the three major credit-reporting bureaus? That's right, on an annual basis you can get one free report each from Experian, Equifax, and Trans Union and find out what is on your credit report. If there are errors or things that need improvement, you can address these problems ahead of time. For approximately $5 - $7 you can get your credit score too. The higher your score, the lower home mortgage interest rate will be. You could save hundreds of dollars per year with this little bit of extra knowledge.
3. Too much house, too little money. Perhaps you could get approved for a more expensive home, yet after calculating all of the other expenses in life, you learn that you will be stretching making monthly Texas mortgage payments. Don't jeopardize your future; if you cannot repay your conventional or jumbo loan, your home could be repossessed. Instead, purchase a home within your means.
4. No rate lock for your conventional or jumbo loan. As Texas mortgage rates rise, you can be assured of a low, fixed rate if you lock in the rate. Imagine getting a great rate only to see it get kicked up a half of a percentage point before you close, costing you hundreds of dollars extra per year! The higher rate could even cost you your loan.
5. Excessive closing fees. You may be able to afford monthly Texas mortgage payments, but can you afford the closing fees? If you aren't careful, you could pay thousands of dollars in extra fees before your home mortgage closes. Get a good faith estimate to find out the fees in advance of your closing.
6. No residual funds leftover. After buying a home, do you have enough money on hand to pay for maintenance costs? Utility bills? Other unforeseen expenses? With no cash on hand, you could soon see yourself running up big credit card fees to pay for expenses.
7. Not using a professional inspector. In some jurisdictions, using a home inspector isn't required. While tempting to not rely upon the services of a trained professional, you may miss an important structural problem and have little or no recourse at closing. Ultimately, by not using a professional inspector it could be one of the costliest mistakes that you make.
8. Waiting on home insurance. Before you can close on your home, you must have a home insurance policy in place. Don't wait until the last minute to get insurance as you could run into delays that may push back the closing date of your home.
9. Signing documents without reading them. Don't assume that the verbal agreements you made are the same as the written agreement you sign. If a problem arises, the written agreement will trump the verbal agreement, no matter how well intentioned either of the parties may have been.
10. Relying on a set closing date. Life happens and closing dates can shift. If you are renting and seeking to move on the same day that your home mortgage close, you could find yourself homeless if the closing date shifts. Build in a buffer of several days to a week to protect yourself.
There are other deadly mistakes that can occur after you have already moved into your home. Chief amongst them is bad mortgage refinancing where owners leap for a lower rate without calculating the closing costs. You may find yourself eligible for mortgage refinancing but learn too late that with all of the closing costs added in, your savings could be wiped out. Better to make certain that your mortgage refinancing plans are checked by an accountant specializing in mortgage refinancing options before agreeing to a new loan.