Anyone’s first mortgage can be a challenging and trying process. There are so many moving parts that you can easily get lost in the process and make some simple but critical mistakes. Preparation and education will take you to the mortgage promised land by understanding the process and the finer aspects of a mortgage.
Making mistakes are part of life, but you can avoid making these common mortgage mistakes.
Not Getting a Fixed-Rate Mortgage
Mortgages are expensive and for many of us, our home will be the single largest purchase we’ll make in our lifetimes and the single largest expenditure month-to-month. With that said, making the right decision on the structure of your mortgage is paramount as making the wrong choice could cost you tens of thousands of dollars.
With mortgage rates currently low, adjustable-rate mortgages can be had for an interest rate at a fraction of the fixed-rate price. This means substantial savings on your mortgage out of the gate and for the life of the loan as long as interest rates remain low. The mistake many first time homebuyers make is they don’t realize the penalty in taking what seems like a no-brainer deal.
Unless you plan on selling your home within 2-5 years of purchasing it, stay smart and get a fixed-rate mortgage. Your investment, payments, and interest will stay the same, and you won’t be at the mercy of the mortgage and financial markets at large. Keep control of your mortgage and go fixed-rate.
Not Being Familiar With The Process
Many first time homebuyers say after the fact that the process of securing a mortgage and purchasing a home was confusing, complicated, and extremely time-consuming. While these things are certainly true, familiarizing yourself with the process ahead of time will ease these symptoms.
Talking to a competent lender should give you an excellent idea of how the mortgage process will go and give you a comprehensive outline. If they can’t give you an idea of the process, it’s probably best to move on to a different lender right away.
Not Putting Enough Money Down
Money down is one of the biggest factors in the mortgage buying process and one of the single biggest factors that will affect your monthly payments. In many cases, a conventional fixed-rate mortgage will require at least 5% down with some form of private mortgage insurance (PMI) to cover the lender in the event of default.
While 5% down isn’t necessarily a huge number, the amount of money you pay in PMI and interest as a result of a lower down payment may make you think twice about putting a little extra down. Most private mortgage insurance premiums fall off after the borrower has reached 20% principle, but you can attain that number faster by putting more down in the first place.
Saving an extra $2,000 to $5,000 could put a huge dent in your down payment and in turn your monthly mortgage payment.
Not Getting Pre-Qualified
Pre-qualification is a must for any first time home buyer, but many borrowers fail to get pre-qualified. We’ve already discussed the importance of understanding the mortgage process, and one of the critical pieces of buying a home is getting preapproved for a mortgage. While you may think you’re an adequate candidate for a mortgage, preapproval can tell you the truth.
No matter what lender you go to, preapproval will be part of the application process. Pre-qualification itself doesn’t take a great deal of work on your end, and if you are already shopping around for different lenders, getting preapproved at all of them is a great place to start. While this may eliminate some lenders from your list by failing to get preapproved, at least you know where to go when you find a rate that works for you.
Conclusion
With so many moving parts, it’s easy to make mistakes during the mortgage application process, but many of those mistakes can be prevented with a little preparation and some education.
If you’d like to talk to a mortgage specialist, contact the people at Tidewater Mortgage Services. The experts at Tidewater can get you moving in the right direction with sound advice and get you preapproved.
