11 Mortgage Mistakes You Might Make and How To Avoid Them

1. Not Knowing Where Your Finances Are
You absolutely need to know what you can afford. This is one of the most hazardous mortgage mistakes. Many home loans allow for up to 50% of your income to be going out towards debt including your mortgage. Assuming you are in the 28% tax bracket. That only leaves you with 17% of your income for food, entertainment, utilities, clothing etc. Just because you are pre-approved for a $200,000 home does not mean that's how much money you should spend. That is just a maximum the lender will allow you to borrow.

2. Not Getting A Copy Of Their Credit Report
If getting pre-qualified over the phone "How's your credit?" is often the first question asked. Most people know that it is either good, bad or merely okay. Knowing your score helps tremendously when shopping for a loan. A lender can give you a more realistic quote when given your credit score. You also need to know if there are errors on your credit. Or if there are judgments or liens that need to be paid off. This mortgage mistake can cost you a higher interest rate.

3. Looking For A House Before Being Pre-Qaulified By A Lender
Why spend a huge amount of time looking for houses. Or worse yet. Falling in love with a home before you even know what a lender will actually let you borrow. You can typically be pre-qualified by a lender in about 10 minutes over the phone. This is always a rough estimate. Until a lender actually gets your full financial picture and sees your credit they don't know for sure. But at least it will give you something to work with.

4. Trying To Buy With No Money
There are still a few kinds of zero down home loans available. But because it is zero down it does not mean zero money. At a minimum you will need $1,000 or more for earnest money, $15-$45 for a credit report, and $300-$450 for an appraisal. Also assume 4% to 5% of the purchase price in closing costs. Many loans available allow the seller to pay a portion or all of your closing costs. But most sellers do not want to pay these costs for you. Unless you agree to pay the full asking price or offer more for the home. If you have a minimum of $1,500 you may be able to buy with zero down. Be prepared it will be more difficult than if you could come up with all the costs yourself. These kinds of mortgage mistakes are often done by people after watching one of those late night infomercials.

5. Not Comparing Different Loan Options
There are close to 40 different types of home loans available. There is probably one that makes the most sense than any of the others given your particular situation. A good loan officer should provide you with several different options. Then explain the pros and cons of each. Then let you decide on which you feel the most comfortable with. This is one of those mortgage mistakes that can cost you thousands of dollars.

6. Giving In To High Pressure Sales Tactics
Buying a home is typically the largest financial decision a person will ever make. Getting sold instead of educated can end up costing you thousands of dollars. Look for a lender that is truly interested in helping you make the right decision when it comes to the financing of your home. This is another one of those mortgage mistakes that can cost you dearly.

7. Not Getting A Home Inspection
Home inspections are very rarely required by lenders. But not having one done on a house you are purchasing can end up costing you thousands of dollars in the end. For only a few hundred dollars it's cheap insurance. Most sellers are willing to fix the problems that an inspector has found with the house. This is one of those mortgage mistakes that can be avoided by not being cheap.

8. Accepting No As The Final Answer
Just because one lender says no. It does not mean all is lost. Banks, mortgage brokers, and mortgage bankers all have access to different types of loans. If one says no another may say yes. If you keep hearing no's. Ask the lender to create a plan for you to follow so you can qualify at some time in the future.

9. Not Buying A Home
Not buying a home at all when it makes sense to do so will cost you dearly. Not only will you keep on wasting money on rent. But you are also losing tax benefits and the growing equity in your home.

10. Refinancing When It Does Not Make Sense Financially.
You really need to take a hard look at how long you are going to be in the home for. If you are not going to be in the home long enough to recoup your closing costs don't do it. Unless you are in a financial bind and absolutely need to.

All you need to do is divide you monthly savings into you closing costs. This will tell you how many months it will take to break even from the refinance. If you are planning on selling before that time is reached try and hold off on refinancing.

11. Choosing A Mortgage Based On The Lowest Fees Or Rates.
What you really need to take a look at is the total cost of the loan. In other words how much is each loan costing you over a set period of time, 5, 10, 15, 30 years. Have your loan officer do a comparison so you can see how much each loan will save or cost you.

All of these mortgage mistakes can now be easily avoided by you. You'll also want to work with a professional mortgage consultant that is more interested in helping you than making a quick buck.

Oregon Residents - Click here to avoid these Mortgage Mistakes Or feel free to give me a call with any questions you may have.