Applying for a mortgage can be a strenuous experience in most cases. Buying a house or commercial property is a big decision and involves a whole lot of money, probably all our savings. Most of us cannot do this without going for a mortgage. Once we go for one, the mortgage becomes one of the largest debts of our lives, eating up a large portion of our annual incomes.
For most home owners mortgage is a first-time experience in life. Therefore, many of them end up making mistakes while applying for one. This could cost them a whole lot of inconvenience and money. We have hereby gathered a list of mistakes that people commonly make while going for a mortgage. All you need to do is go through these and then make sure you avoid making them.
Over-using your credit card:
You might think it is ok to keep using your credit card as long as you pay off your bills. No, it is not. This can affect your credit score negatively and hamper your chances of getting a good deal on your mortgage. Using your credit card is like applying for a loan and doing this extensively would mean squeezing out your credit ratio. This is not very good especially if you wish to go for a mortgage.
Not getting your Mortgage Pre-approved:
Before applying for a mortgage, it is very important to find out if you are eligible for mortgage financing. Getting your mortgage pre-approved is essential as the bank would like to run a check on your assets, income as well as credit reports.
Not budgeting well:
If you are buying home for the first time, you may not have any idea about the expenses you are going to come across. Apart from the monthly mortgage payments, you will also have to consider property taxes, utility bills, the insurance charges, cost for repairs and maintenance and so on. Roughly, about 30% of your gross income should cover your property taxes, insurance and mortgage cost.
Not consulting a mortgage broker:
Mortgage lenders are many and each of them differs when it comes to interest rates and terms. As a first-time home buyer you may not understand these that well. It is wiser to go with a mortgage broker who can help you understand these terms and go with the best mortgage that suits your requirements and fits into your budget.
Not planning for the closing costs:
Once your mortgage is approved, you may have to pay up for a few closing costs including lender fees, prepaid homeowner’s insurance and certain taxes. These may come up to about 7% of the cost of your home. It is important to plan up for these costs so that you will have no problems while purchasing your house.
Keeping in mind the points that are mentioned above can save you from getting into wrong mortgage deals. However, you will have to do your own research and home work to make sure you get an excellent mortgage at a good rate which helps you sail through without making too deep a hole in your wallet.
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