Mortgage - 5 Terrible mistakes you should be aware of

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By: anonymous
on 9th Mar,2011

Taking out a mortgage can be intimidating task. Most people do not understand the process of taking out a mortgage.
Mortgage - 5 Terrible mistakes you should be aware of

Taking out a mortgage can be intimidating task. Most people do not understand the process of taking out a mortgage. You may mis-judge the loan terms or overestimate your affordability or credit. Thus, when you're taking out the biggest debt of your life, make sure you know what is right and what is wrong for you.

Let's take a look at the 5 mistakes that you should be aware of when you're taking out a mortgage:

Forgetting the first-time home buyers' programs:
Such programs are sponsored by state, county or city governments. Those who are first time home buyers, they can get better interest rates and terms compared to normal private lenders. If you do not own any property in the last 3 years, then you will be able to qualify as a first time home owner.

Avoiding loan pre-approval:
Most of the borrowers confuse pre-qualification and pre-approval. In the process of pre-qualification, the lender will let you the amount of money you'll be able to borrow and the amount of down payment you need to pay. Whereas getting a pre-approval is quite difficult. In this process you'll have to submit your tax returns, pay stubs, etc. The lender will verify the information and then process your loan.

Avoid credit related issues: Credit is quite important in order to qualify for a mortgage. Thus, before applying for a mortgage, you should get hold of your credit report and check out your scores. Unless you've a good credit score, none of the lenders will be ready to give you a mortgage. So, if you have a poor credit score, take steps to improve your credit score and then apply for a mortgage. You should also dispute the errors in your credit report and rectify them which will also help you in improving your credit scores.

Taking out a huge loan:
You should take out such a loan which you can afford to pay off. Various mortgage affordability calculators are available online which will help you in calculating how much house you'll be able to afford. Taking out a huge loan will only make things difficult for you as you won't be able to pay it off. Thus, you may have to face foreclosure and other credit related issues.

Forgetting to get the lock-in rate in writing:
Your loan company representative will let you know that the mortgage rate will be locked in. However, it is your duty to get the lock-in rate in writing. If you do not have the lock in rate in writing, then it won't help you at closing. If the mortgage rates have changed at the time of closing, then you'll have to go with the new rates if you cannot show the locked in rate in writing. You should get a written proof from the lender which mentions the interest rate, the length of the rate lock and other details about the loan.

Apart from this, before you sign on the dotted lines, make sure to read through the fine print and clarify everything from the lender regarding the loan. This will help you in avoiding any future problems regarding your loan.

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