Buying a home is a huge financial investment. It is an exciting as well as a stressful affair to find or build a dream home and taking out a suitable mortgage loan. Therefore, many of you commit some mistakes while going through the process. Here are 5 such mistakes which you should be aware of while taking out a mortgage loan.
- Taking out a mortgage loan without shopping around - You might have a talk with your bank regarding taking out a mortgage loan and get pre-approved by them. The terms and conditions may also feel suitable to you. However, by doing so, you'll be unaware whether or not some other lender is offering mortgage loans at better terms and conditions at your credit score. Therefore, always shop around and choose a home loan that you feel is the best and which you think you'll be able to manage properly.
- Not checking your credit score before applying for a loan - Applying for a mortgage and not checking your credit report previously, is perhaps the greatest mistake you can make. The mortgage lenders check your credit report minutely before granting your loan request; therefore, prepare yourself beforehand to prevent from being shocked. Check your scores and improve it, if required, before you approach the mortgage lending companies.
- Obtaining a mortgage loan which is difficult to afford - It will be a great mistake if you take out a mortgage loan which will be difficult for you to afford. Usually the lenders will calculate your affordability before granting your loan request. However, you're best person who can calculate whether or not you'll be able to make your mortgage payments throughout the term, depending on the change in financial circumstances in the future. Many of you trade your current rent for monthly mortgage payments; however, buying a house has some additional financial responsibilities which you should also take into consideration; they are, buying home insurance, periodic maintenance, etc. So, add all these with your monthly mortgage cost to calculate your affordability.
- Applying for a new credit along with applying for a mortgage - When you apply for a home loan, the lenders check your credit report and score in order to check your creditworthiness. Therefore, when you apply for another credit, your credit score may drop temporarily, since it is regarded as a hard inquiry. Also, you should not close any credit account during this time since it might also reduce your credit score to some extent.
Apart from above, one of the biggest mistakes (No. 5) people often make is signing documents without understanding them. Make sure you understand each and every aspect of your mortgage loan while you sign the documents. Clearly understand the payments you need to make throughout the loan term along with the type of interest rate you're signing up for. All these knowledge will help you understand the mortgage loan well, which in turn, will help you manage your loan properly throughout the loan term.