Top Mistakes to Avoid When Shopping for a First Mortgage
Buying your first home is an exciting time full of many emotions. You are ready apply for your first mortgage on your own and become a homeowner! This time is also full of lots of important information, and sometimes you can feel a little overwhelmed.
To help you through the process, we want to walk you through some common first mortgage mistakes. By arming you with this information, we can help you find a home loan that meets your goals, so you can grab the keys to your new home confidently.
Choosing the First Mortgage You Find
We know how you feel. You found a home, so it is time to hurry up and grab a mortgage so you can buy it!
But hold on a minute. Did you know there might be other mortgage options that are more affordable? Slow down long enough to do your research so you can be confident you have found the right home loan. Working with a mortgage specialist who understands your local lenders and the local mortgage trends will help you find the right mortgage for your specific financial situation.
Mistaking Pre-Qualification for Pre-Approval
That paper that says the bank is willing to loan you money feels like a golden ticket, but again be careful. You can get either pre-qualified or pre-approved, and these are not the same thing.
If you are pre-qualified, your mortgage lender is saying that, based on information you provided, you can get a loan. The information you provide is not verified, and thus it could be inaccurate. While you would not intentionally deceive your lender, you may not be aware of your entire financial and credit picture.
Pre-approval, on the other hand, means the lender has checked your credit and income and decided you are a safe risk. This is a powerful tool because it shows the home’s seller that you’re ready to go if they accept your offer. This is the one you want.
Putting as Little Down as Possible
We know, saving thousands for your first home seems a little hard. But it is worth it! Here is why:
First, your down payment cuts the principal of your loan, which in turn cuts the amount of interest you pay over its lifespan. Second, low-money-down loans come with a pesky fee called private mortgage insurance. This adds to your monthly costs. If you can put down a larger down payment, you can save yourself from inflated mortgage costs.
Not Locking in a Rate
Rate locks can feel a bit like playing the lottery. There is always a risk that the rate will drop after you have signed on the dotted line. Yet the opposite is true too. If you do not lock in the rate, you run the risk of having it increase as well.
Again, this is where a local mortgage specialist who has watched the rate trends closely can help you make a wise decision, but for most buyers, locking in a rate when it seems low is the best option.
Taking Out More Credit
When you are in the market for a mortgage, you must guard your credit carefully. One thing that can hurt your credit is hard inquiries. These happen any time you open a new type of credit and the lender looks at your credit score.
Even if you are not going to use that credit card or credit line, simply opening it can drop your credit score and hurt your chances of a good mortgage rate. Wait until after you have signed for your mortgage if you’re looking at a new credit card, car loan, or other line of credit.
Not Working with a Local Mortgage Professional
Mortgages, just like real estate, follow local trends. There are local nuances that must be understood to make informed decisions. The best way to ensure that you are getting the top advice for your local community is to work with a local mortgage professional. Remember, your real estate market is unique, and you need a mortgage company that understands it.
Ignoring State and Local Programs for First-Time Buyers
When getting your first mortgage and home, you want to take advantage of all the help that’s out there, right? Many states and localities offer incentive programs for first-time homebuyers. These might offer down payment assistance grants, zero-percent loans for home improvements and other programs to help cut down on the costs of buying your first home.
Sounds like a good idea, doesn’t it? Make sure you investigate all potential helps. This is another area where a local mortgage specialist can help you find the best deals.
You are finally ready to start the process of buying your first home. We are excited for you! We are ready to be your local mortgage expert. Reach out today to get the best mortgage advice from someone who knows the local markets well.
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