The 6 Worst Mortgage Mistakes You Can Make

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Is your house a beloved castle? Is it a monkey on my back?

The answer may depend on the mortgage you have. You might feel like your life is perfect if you can find a property that’s affordable at a low rate.

But ask anyone who has bought a house with an illegible mortgage and can’t afford it. They will tell you that the house brought them pain and frustration.

Avoid these mortgage mistakes if you are looking for a house soon.

1. You should not review your credit history

You need to have a high credit score in order to qualify for a mortgage.

At least six months before you go to your first open house, go to AnnualCreditReport.com. This is the official website where you can obtain free credit reports from the three major credit-reporting agencies, Equifax, Experian, and TransUnion. You’re entitled to one free credit report from each agency annually — and, until April 2022, as often as weekly.

Before applying for a mortgage, make sure you identify and correct any errors in the report.

Check your credit score. As a monthly perk, some banks and credit card companies now provide access to the FICO score, which is the most popular credit score.

If your credit score is low, you can learn how to improve it quickly by reading “7 Ways To Boost Your Credit Score Quick

Bottom line: Take the time to make sure your credit is in good shape to be able to receive the best terms from lenders.

2. Failing to get preapproved

Getting preapproved by a bank for a given loan amount is one way to avoid the heartbreak that comes from falling in love with a house out of your price range.

It may give you an advantage: Sellers feel more comfortable selecting bids from people who have preapproved for a mortgage than those who have not started the process.

Don’t let the bank give you a preapproved amount. Keep in mind that what the bank says you can afford and what your actual financial situation is may not be the same thing. Check out “How to Calculate How Much House You can Afford

3. Not shopping around for the best rate

The Consumer Financial Protection Bureau states that nearly half of mortgage borrowers do not shop around. This is a huge mistake. While seasoned shoppers look for the best deals for soap, furniture, and cars, some don’t search for better mortgage rates.

It may seem convenient to use your primary bank for mortgages, but it could be costly if the rates aren’t competitive.

So, visit the Money Talks News Solutions Center to compare mortgage rates.

4. Do not ignore mortgage fees

While you are looking at rates, do not forget about the fees. There are many fees associated with mortgages. While some fees, such as the county recording fee, are fixed, others can be negotiated.

Before you close, it is important to get a fair estimate of the fees. Ask your lender for a good estimate of the fees and negotiate a lower price. These are a few of the fees likely to have the most wiggle room:

  • Loan origination fee
  • Application fee
  • Broker fee
  • Underwriting fee

5. A low down payment

can hurt your chances of getting a mortgage. As the Consumer Financial Protection Bureau says:

“In general, the less money you put down upfront, the more money you will pay in interest and fees over the life of the loan.”

And if you put down less than 20%, be prepared to pay for private mortgage insurance.

HTML6. Not understanding your mortgage terms

Underwater loans weren’t the only issue homeowners had to face during the Great Recession. Untold numbers of homeowners lost their homes because they didn’t understand what their mortgage meant.

People thought they were in the right place when they got adjustable-rate mortgages (ARMs). For the first few years, homeowners were okay while their mortgage rate was low and fixed. Then, the market rate went up and suddenly the monthly payment was no longer affordable.

The moral of this story is to make sure you understand what you are signing up for. It doesn’t suffice to know your monthly payment today.

If you aren’t comfortable or understand the terms of your loan, it’s better not to make a costly and potentially life-altering error.

Disclosure: The information you read here is always objective. Sometimes, however, we receive compensation if you click on links in our stories.

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Maryalene LaPonsie,https://www.moneytalksnews.com/6-worst-mortgage-mistakes-you-can-make/

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