07/22/2010 Getting a mortgage loan can be a complicated process. You research lenders, fill out paperwork, talk to inspectors and appraisers, meet with brokers, fill out more paperwork, and at the end of the day, you pay a lot of money. While each of the professionals you'll meet with along the way will offer advice and help you out, it's easy to slip up and make mistakes.
Mortgages are complex, but mistakes are all too simple. The four most common mortgage mistakes are listed below.
Not doing the research. This happens all the time. There's a bank down the street that does loans. You go to them and get a loan. That's it. Don't do it this way. Instead, do as much research as you possibly can. Educate yourself on how the mortgage industry works. Talk to professionals. Get advice. Learn everything you can. Compare mortgage rates. Compare loan types, such as FHA home loans and VA Home Loans and term lengths. Compare point requirements and closing costs. Find the best deal you can.
Forgetting about the closing costs. This is the fastest way to shoot yourself in the foot during a mortgage deal, and it's a much more common mistake than you think. You've spent countless hours researching lenders and comparing rates, and you've picked the one who offers the best package. But lenders rarely advertise their closing costs. Unless you specifically ask for a good faith estimate--a written document that outlines all fees involved in the deal--you may not know the full amount you owe until the day the deal closes. Surprise!
Take all costs into consideration when comparing lenders. Ask for a good faith estimate from every lender you're seriously considering and factor these amounts into consideration when making a final decision.
Not buying home insurance. Some lenders require you to have home insurance before closing. If you forget to purchase a home insurance policy until your lender reminds you halfway through the deal, you'll have to rush your policy selection, and you may not pick the option that's best for your needs. Just like when shopping for a mortgage, do research and educate yourself on the best insurance deals available.
Not having enough money. This is a big one. You've done your research, you've found the best mortgage, you've calculated the closing costs and you've purchased home insurance. Even including the down payment on the loan and the points paid up front, your budget works out nicely--too nicely, perhaps.
Many homeowners have created major financial problems for themselves by not budgeting beyond the mortgage deal itself. Be sure to set aside enough money for a few monthly mortgage payments in addition to the funds for the loan down payment and closing costs.
