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5 Mistakes That Could Potentially Add Thousands to Your Mortgage

20 June 2017 No Comment

They say that buying a house is the second greatest investment you will ever make – that is after your children’s education. Unfortunately, it is also one of the biggest debts you will incur in your life. Although this may sound intimidating, a house is still a worthy investment.

However, the house buying process requires caution and attention to detail. Make a mistake, and you will pay for it in high monthly payments or interest rates that change unexpectedly. With that in mind, here are five mistakes that could potentially add thousands to your mortgage.

1) Not Reviewing Your Credit Score

Before you attempt to get a mortgage, make sure you first review your credit score. Simply use one of the many online credit score services, such as myFICO.com. and if you are married, also check your spouse’s. Remember, banks always base their mortgage rates on the income of the spouse with the lower score. So, if that is you, you will want to qualify for the mortgage on only your spouse’s income.

Similarly, get a credit report from any credit reference bureau, and then review it for errors. If there are any, dispute them. Also, be on the lookout for outstanding bills, and pay them off immediately to improve your score. With a low score, your mortgage rates will always be high.

2) Not Pre-Qualifying and Pre-Approving

The pre-qualifying process lets you know the kind of home you can afford, and more importantly, the mortgage rates you can expect to pay. Besides getting pre-qualified, also get pre-approved.

Pre-approval takes things up a notch and gives you an estimate of how much a lender will lend you. Pre-qualifying and pre-approving your mortgage gives you an idea of what you can afford. This way, you avoid biting off more than you can chew.

3) Not Getting More Than One Quote

Do not, like most people, make the mistake of getting a mortgage quote from only one lender. Instead, approach as many lenders as you can – local banks and credit unions included – and get quotes from them. Sometimes, it also helps if you get an online quote as well.

However, even as you do this, be cautious. Make sure you get all your quotes within a two-week period. Exceeding this period lowers your credit score, for it will appear like you are applying for many loans from different lenders.

4) Not Watching Out for Hidden Charges

Most mortgage applications come with many hidden charges. These include fees for signing up, underwriting, loan origination, and document preparation. Others are application fees, broker fees, and messenger fees.

5) Not Understanding the Terms of the Loan

No matter how desperate you are to own a house, do not sign the mortgage contract without fully understanding it first. Make sure you know what your mortgage rates will be; also, determine if the loan’s interest rate will change in time. Better still, get a friend or lawyer to go through the loan documents for you just in case you miss something. If you still do not understand the documents, do not sign them, even if the deal looks good.

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