Credit Sesame offers advice on five mortgage mistakes to steer clear of.
Congratulations on taking the exciting step towards homeownership. Securing a mortgage is a key part of the process, and avoiding these common mistakes can ensure you get the best possible deal and steer clear of costly pitfalls.
Mistake 1: Neglecting your credit
Lenders heavily rely on your credit score to determine your interest rate. The higher your score, the lower your rate will be. Obtain a copy of your free credit report summary at least six months before applying for a mortgage. This allows ample time to identify and address any errors or areas for improvement. Dispute inaccuracies and take steps to boost your score, such as paying down debts or becoming an authorized user on a trusted friend or family member’s credit card with a good history.
Mistake 2: Changing jobs just before you apply for a mortgage
A steady income and consistent employment history demonstrate reliability to lenders. If you’ve recently changed jobs frequently, consider staying at your current position until your mortgage is finalized. This strengthens your application and increases your chances of securing a favorable interest rate.
Mistake 3: Settling for the first mortgage offer you get
The mortgage market is competitive, and interest rates and loan terms can vary significantly between lenders. Don’t accept the first offer you receive! Obtain quotes from multiple banks, credit unions, and online lenders to get the best deal. Comparing options can potentially save you thousands of dollars over the life of your loan.
Mistake 4: Not saving a down payment
A larger down payment reduces the amount you need to borrow and lowers your monthly payment. While a 20% down payment is traditionally recommended, government-backed programs are available for qualified borrowers with a lower down payment. Explore your options with a mortgage lender to determine the best approach for your financial situation. For example, FHA loans allow a minimum down payment of 3.5%. The Federal Housing Administration (FHA) explains its loan programs in detail, including eligibility requirements.
Mistake 5: Failing to lock in your interest rate
Interest rates fluctuate, so locking in your rate protects you from potential increases during the loan application process. Most lenders offer lock periods of 30-45 days. Ensure you can close on the house within that timeframe to avoid being subject to a higher rate or incurring fees for extending the lock. The Consumer Financial Protection Bureau (CFPB) offers a comprehensive guide on the entire mortgage process, including information on locking in your interest rate.
By being proactive and informed, you can navigate the mortgage process with confidence and secure the perfect loan for your dream home.
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Disclaimer: The article and information provided here are for informational purposes only and are not intended as a substitute for professional advice.
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