Seven Mistakes On Mortgages That Can Be Dodged

 

Whenever you are making any large financial decisions, due diligence is a must. When it comes to obtaining a mortgage, overlooking these mistakes can cost several thousand. Here are seven mistakes that should not be overlooked when it comes to a mortgage.

Number one is to avoid not shopping around.

Just like with any other consumer product or service, you always want to shop around for the best deal. By doing this, homeowners can save by obtaining lower mortgage rates. According to a study done by Freddie Mac, consumers who obtain five rate offers saved around 16.6 basis points (bps) (or 0.166 percent) on their rate on average.

One myth that can be laid to rest is by shopping around for a mortgage you will lower your credit score. This is not the case. Usually, there are two weeks where you can have additional hard inquiries without penalty. Take your time and shop around do not just take the first offer without making sure it is the best for you.

Number two avoid paying unnecessary fees.

Do not just focus on your mortgage payment, there are additional fees that need to be considered when obtaining a mortgage. Even with no origination fees or lender commissions, there is still some additional cost that cannot be waived. The fees that can be waived are application fees, loan origination fees, loan officer commission and credit report fees.

Number three consider a 15 or 20-year mortgage.

You do save a little with a 30-year mortgage but that is only short-term. Over the life span of the mortgage, you will make payments for a longer period of time adding more interest than you pay to the lender.

With a 15-year mortgage, the monthly payments are higher but you will pay off the principal faster and with less interest paid to the lender. A 15-year mortgage interest rate is lower so you will be paying more towards the principal.

To make sure you make the right decision for you, compare the principal and interest on a 30-year fixed vs a 15-year fixed. If you are obtaining a $250,000 mortgage with a 10% down payment, a 30-year fixed will have a monthly payment of $1,024 with a 3.61% interest rate that totals to $143,719 in interest costs and a 15-year fixed with a rate of 3.13% will have a monthly payment of $1,568 and total interest cost of $57,226.

Number four consider all the cost when it comes to owning a home.

There are tons of hidden and sudden expenses when it comes to owning a home. Your final cost is not just the monthly mortgage payment so do not count on the figure a mortgage calculators give you.

A rule of thumb is to put away at least one percent of your home’s value each year for home maintenance and repair. So for a $360,000 house, you would set aside $3,600 a year or $300 a month.

Number five make sure you have a clear understanding of points and lender credits.

Points on a mortgage are referred to as discount points. When obtaining a mortgage you can pay off a one-time fee or points on top of your normal closing cost to get lower interest rates. Credits are referred to as lender credits. You would pay less in closing costs but have a higher interest rate.

Weigh each option to see which would be the best for you. Ask yourself how long will you hold on to the property? If you are going to keep the property for a long period of time you would benefit from paying discount points. However, if you are only planning to sell or refinance in a couple of years, lender credits are the way to go.

Number six check your credit score prior to obtaining a mortgage.

Your credit score can have a huge impact on approval for a mortgage. Each credit bureau allows a free credit report every year. It is always a good idea to review your credit report annually.

Number seven never leave any information off of your mortgage application.

The mortgage application is the first key step in getting preapproved. Misinformation or omitted information can lead to a non-approval. A common mistake many make is not including child support or alimony payments.

Lenders want to see everything you owe to make sure you can afford your mortgage payments. Even if you incur debt but make little or no payments, it is still owed.

Avoiding these mistakes is just one of the many steps you should take when obtaining a mortgage. When purchasing a home, your Realtor can help you make the right decision on a mortgage lender.

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Tips To Making A Competitive Offer On A Home

Today's housing market is definitely a seller's market. A buyer has to stand out in order to successfully win a bidding war. Here are five tips to follow in order to set yourself above other buyers.

 

Listen to Your Real Estate Agent

Going at it alone is not a wise move when it comes to finding and purchasing a home. According to an article from Freddie Mac, purchasing a home can be very emotional and a professional can help an emotional buyer stay on track.

“Remember to let your homebuying team guide you on your journey, not your emotions. Their support and expertise will keep you from compromising on your must-haves and future financial stability.”

Understand Your Finances

Know what you can afford before you begin even searching for a new home. It is a must to have a complete understanding of your budget. Again, a professional can help you with this portion of the process. Find a mortgage lender who can get you pre-approved for a loan. Taking a pre-approval letter to a seller shows that you are serious and can follow through with your offer. Forty-four percent of homebuyers in the current market get pre-approved. In order to stand out, you must get pre-approved.

Be Ready to Move Quickly

The average property listed in today's market is receiving more than three offers in the first few weeks of being listed. This data comes from the National Association of Realtors' monthly publication called Realtors Confidence Index. This means as a buyer you need to be willing to make a move on the spot if you find the right home for your needs. Be prepared to submit an offer as quickly as possible.

Make A Fair Offer

Both the buyer and seller want to get the best deal possible. As a buyer, you do not want to overpay for a home, but you also do not want to give a low-ball offer. If a seller receives a low offer, they might question how serious you are about purchasing their property. Your Realtor will be able to guide you in the decision when it comes to your offer price. You will want to make your offer based on the market value of the home.

Be a Flexible Negotiator

A seller has the right to accept an offer, reject it or counter with an offer. In today's market with such little inventory and so many buyers, you must stay flexible with things such as move-in dates, a higher offer price than the home is listed for, or minimal contingencies. When it comes to contingencies, conditions you set that the seller must meet for the purchase to be finalized, Freddie Mac warns to stay firm when it comes to a home inspection.

Even in today's hot market, buyers can find and purchase the home of their dreams for the right price. Remember to always contact a Realtor who can help you along the way.

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What You Shouldn’t Do After Applying for a Mortgage

Applying For a mortgage is a big part of purchasing a new home. This can be an exciting yet daunting task.  Here are a few things you shouldn't do once you have applied for a mortgage.

Speak to your banker or lender before depositing cash into your bank account.  You do not want to deposit a big chunk of cash into your account all of the sudden. During the mortgage process, lenders need to be able to track where your money is coming from and cash is not easy to track. You can deposit cash during your mortgage process but you will need to discuss how to document your transactions with your lender.

Put big purchases on hold until after the application process. Purchasing new furniture or a new car is a big obligation and will bring monthly payments. Lenders take in all monthly expenses when qualifying you for a loan. If new obligations are created then you will need to be reviewed again. A higher debt-to-income ratio will have to be adjusted. Lenders will tell you that higher ratios equal riskier loans.

Hold off on any co-signing for anyone on their loan. Co-signing is just like obligating yourself to someone else's loan. These obligations will also make you have a higher ratio. Although you are just co-signing, a lender looks at this as another expense you are responsible for.

Do not change bank accounts. One of the steps on a mortgage application is to list your bank accounts. Lenders need to be able to see where your money comes from and where it goes. If you were to change bank accounts during the process, this can hinder a lender from sourcing and tracking your assets. If you have no other option but to change bank accounts, speak to your lender.

Now is not the time to apply for a new credit card. Whenever a financial organization runs your credit report, your FICO® sore is affected. The higher your credit score the better interest rate a lender can offer you. Lower credit scores will not only determine your interest rate but can also hinder you from being approved for a mortgage.

Keep your current accounts open. There is a misconception that less is best when it comes to open credit accounts. This is not true, in fact, it helps to have a long list and depth of credit history. Closing a credit account can actually create a negative impact on your score.

Remember to keep an open line of communication with your lender throughout your mortgage application process. If you have a change in income, job or have to move things around you should share all those things with your lender. The best plan is to fully disclose and discuss your intentions with your loan officer before you do anything financial in nature.

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