The home-financing process can be intimidating, especially if you are a first-time home buyer with little idea of what to anticipate—no need to be concerned. To further educate you on what not to do, we took the time to highlight frequent home purchasing blunders that occur throughout the mortgage process.
1. Failing to Check Your Credit Scores
Your credit score represents your complete credit history, and lenders use it to determine how likely you are to repay your mortgage. So, the higher your credit score, the better interest rate you’ll get because you’re seen as a more trustworthy borrower. Over the life of your loan, this can save you hundreds of dollars in interest.
Check your credit score before beginning the mortgage application process. Reduce your debt, make on-time (debt) payments, and restrict your credit applications to accomplish this. Check your credit score, of course. You may do it for free without harming your credit.
2. Choosing an Absurdly Expensive Home
You may be caught up in the moment and fall in love with a home that is way out of your budget. It’s important to note that just because you may be approved for a loan amount, doesn’t mean you should spend it all. Stick to your budget, and don’t let emotions get in the way of reason. An expensive home comes with expensive monthly payments, leaving little room to save or enjoy your life.
3. Not Getting Prequalified With A Mortgage Lender
Many buyers wait until they find a home before connecting with a lender, but this can put you at a disadvantage. By getting prequalified, you’ll know how much house you can afford and what type of mortgage programs you qualify for. This will help narrow your search to homes that fit both your needs and budget. In addition, once you find a home and are ready to make an offer, being prequalified will give you more negotiating power with the seller since they’ll know you’re a serious buyer who is approved for financing.
4. Not Looking at Enough Houses
When you find a home you think you love, it can be tempting to put in an offer right away and cross your fingers that it all works out. But don’t fall victim to FOMO (fear of missing out). It’s important to view several homes before making an offer on one. This will help ensure you’re truly making the best decision for your needs and budget.
5. Quitting Their Job
A lot can change in 30-60 days, which is typically how long the mortgage process takes from start to finish. So, unless you have another job lined up or some other source of income, don’t quit your current gig until after you close on your new home. Lenders like stability, so if you switch jobs in the middle of the mortgage process, it could put your loan at risk.
6. Opening A New Line Of Credit
During the mortgage process, lenders will pull a copy of your credit report to check for any new lines of credit you may have opened. Every time you apply for new credit, an inquiry is made on your report, which can slightly lower your score. So, if you’re close to qualifying for the best interest rate possible, resist the urge to apply for that new store credit card. The few points you could lose by doing so could cost you thousands of dollars in interest over the life of your loan.
The home-buying process comes with a lot of important decisions and steps, but as long as you do your research and stay ahead of the game, you’ll be just fine. Keep these tips in mind to avoid common mistakes while searching for the perfect home.
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