Whether you’re a first-time buyer or a homeowner looking to trade-up, your time to buy could be coming. Here are some common mortgage borrower mistakes to avoid:
- Don’t ignore past or current credit problems or do anything to harm your future credit score. Whether it’s your FICO score or a blemish in your past, address the problem immediately. You’ll have more flexibility as you begin to pre-qualify for a mortgage and eventually get pre-approved.
- Think twice about changing jobs. This could be the next advancement for your personal career but remember that obtaining a mortgage means not only showing job history, but current employment longevity as well.
- Don’t exclude or misrepresent any borrower/credit history when you transition from pre-qualifying to getting pre-approved. After getting pre-qualified, the mortgage application process will entail some personal questions that dig into your financial past. This includes child support, alimony payments, student loans — anything and everything.
- Don’t dismiss your down payment availability. Figure out approximately how much house you can afford and how much you can put down to put you ahead of other borrowers who are still trying to determine those details. Be realistic with what you can afford and document any gifts for your down payment to avoid delays in the application process.
- Don’t Avoid Amortization. Amortization helps your average borrower afford paying off a home in approximately 30 years. The first 15 to20 years of monthly payments will go toward paying off “interest ” on the borrowing cost and the last following years will go toward paying off “principal,” – the actual money you borrowed.
- Don’t select the first loan product you find. Fannie Mae, Freddie Mac, the Federal Housing Administration (FHA), the U.S. Veterans Administration (VA), and the U.S. Department of Agriculture (USDA) have several programs to help first-time homeowners, all with different requirements. Consider all your options before you select a loan product and take advantage of the best loan for your situation.
- Don’t forget to ask your Loan Officer about discount points. Discount points represent a fee borrowers can pay to lower their mortgage interest rate. The more points you pay for, the higher the fee and the lower your interest rate and borrowing cost over time. This is not ideal for everyone. Ask your credit union’s loan officer to work out different scenarios to see if it’s really worth it.
- Don’t use every dollar you have for your down payment. You shouldn’t drain your reserves by putting that much more “money down” just to find out later you could have used it for repairs or renovations. Weigh your “need” to make a large down payment with your “need” to keep some money for yourself.
As you step into the housing market make sure to avoid these mortgage mistakes so you can get closer to making your homeownership dreams possible.