When you look at mortgage ratesyou may be hunting for a house.
Buying a house is probably going to be the most expensive thing you ever do. It is not really something you go into haphazardly; it's not a candy bar you grab at the supermarket checkout.
Therefore, you don't want to fall victim to major domestic accidents, such as when you pay too much for a house, pay more than you need in interest, or miss the best deal. These are the biggest mistakes to avoid.
Read more : Mortgages, credit scores and down payments: 5 things you need to know before buying a house
. Not getting pre-approved first
The best way to show sellers that you take a property seriously is to get pre-approval first. A pre-approval letter is when you file a mortgage application before even identifying a home you want to buy. Your lender will collect your credit report when evaluating your data, so you can see how much money he wants to give you for a. This essentially means that you are almost certain of financing for your future home.
That letter is what sellers and real estate agents want to see. It's different than getting pre-qualified that is when you can get estimated rates and terms based on the information you provide to lenders. Prior approval is when lenders request your credit report. Sellers take you seriously if you have a prior approval letter.
2. Visiting houses that are too expensive
Looking at shop windows is fun when it comes to clothes or shoes, but when it comes to houses you just get hope. Getting prequalified – and pre-approved later – will show you how much you can afford. When you look at houses that are out of your budget, you tell yourself it can work if you can't.
It is also a good idea to look for homes that are well below the grade for which you have been approved. That gives you some wiggle room when negotiating with the seller (and possibly competing with other buyers for the same home).
If you are stuck getting a house that is out of your price range, you may want to consider buying until you get a higher down payment or your income increases.
3. Skip lender comparison
Not all mortgage lenders are created equal, which means that when you search for potential lenders, you can compare many offers at once. Some only require prequalification, which means you can view many offers without causing a hard draw.
When you compare lenders, look at what they offer, including interest rates, fees, repayment terms and even non-financial matters such as customer service and how quickly your application is processed.
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4. Don't check your credit first
is the most important part of getting approval for a home loan. Lenders are eliminated if you have a lot of debt or if you are late to pay off. It means that you could pay off your mortgage too late.
Before you are approved, you should first see what the lenders will see and check your credit score. You can do this online for free through your bank or credit card company, or online services Mint and Credit Karma. Checkand remove any errors and, if possible, bad numbers.
5. Carrying a lot of debt
Although your credit score is the most important factor in determining the approval of your home loan, how much debt you have is a very close second.
Your debt to income ratio is how much debt you bear compared to how much you earn. Add up your monthly payments, excluding expenses such as groceries, utilities, or gas, but:
- home payments
- student loans, car loans, or other monthly loans
- credit card payments
- child support and maintenance payments
Then share this due to your gross monthly income. That percentage is your DTI. The lower your DTI, the better, but lenders like DTIs with 36% or less (some lenders accept DTIs up to 50%).
6. Missing the opportunity to rate shop
Rate shopping is when you sign up with many different lenders simultaneously to get the best rate. When looking for approval letters, you can sign up with a few different lenders and compare offers.
If you review your shop and receive multiple pre-approval letters, you have the chance to negotiate with many lenders. Use them to get even lower rates than what you are offered.
Likewise, you must also assess home insurance to compare coverage and rates.
7. Saving all the money for the down payment
A hefty down payment is important, but if you put all your money into your down payment, you may not have enough to cover other costs.
First, you need a piece of cash for closing costs when closing your home. While some loans let you pass the closing costs on in your home loan, it means you pay interest on it over time. That means more money out of your pocket in the long run.
You may also need money for moving costs or home improvements. If you want to paint the walls or install a new cabinet system before moving in, you have to pay for those upgrades. If you put all your money in your deposit, it means that you are & # 39; house poor & # 39; and that's when you put all your money into mortgage-related costs and you run out of money for something else. You can avoid becoming house poor by finding a home that is within your budget and saving enough money separate from other house costs.
Read more : 6 things you need to know about refinancing now