At its best, the home buying process is difficult to navigate. It’s common for people to have questions before getting started. As exciting as it can be, there are many pitfalls and mistakes that should be avoided for a successful closing. It’s extremely important that buyers are educated on these common mortgage mistakes,as making these mistakes can lead to a rejected mortgage application.
1. Little or No Down Payment
Making a small down payment may sound like an attractive option when you’re buying a house. Unfortunately, the less you pay up front, the more you’ll pay over time. If your down payment is too small, you could eventually find yourself under water with your mortgage, and that could lead to foreclosure.
Don’t be tempted by offers to make a small down payment. A large down payment can equal smaller monthly payments, and a faster pay-off date.
2. Reverse Mortgages
Sometimes homeowners lacking financial resources to pay for a home improvement will seek help from a lender. Reverse mortgages are often advertised as a great solution to these problems. Unfortunately, most of these claims are false. Reverse mortgages can have complex fees that confuse homeowners and reduce equity in the home.
Reverse mortgages also leave homeowners with no ability to pass on their home to their loved ones in their will. There are also many fraudulent lenders who take advantage of senior homeowners in seek of funds. Anyone considering a reverse mortgage for their home should do research and only work with a reputable lender.
3. Not Using a Local Mortgage Company
Companies that know the local market may adjust their policies based on the types and prices of local homes and the challenges that buyers and sellers are experiencing in the area.
Non-local companies are less likely to make these adjustments, and may not even be able to make these adjustments, even if they make sense. At Mid America Mortgage in Columbia, MO, we adjust our lending practices for the local home buyers and sellers, to ensure that local consumers may continue buying and selling homes given local conditions.
4. Ignoring Credit Score and History
Credit score and credit history can have a big impact on whether you’re able to get a home loan and what mortgage rates lenders will offer you. Check your credit score and credit history before applying for a mortgage. If your credit score needs improvement, follow these tips:
- Pay down credit card balances by making payments on time and pay an amount that is higher than the minimum.
- Pay all other bills on time.
- Check your credit report for errors and correct those errors with the credit bureau.
- Apply for credit only as needed.
- Don’t close any credit card accounts.
- Pay off your debts.
Good credit can take a long time to achieve. If your credit score is not high, you may need to wait some time before applying for a mortgage. If you believe that now is the right time to apply, shop around and work with a reputable lender to get the best rates possible. You may be able to get a mortgage with higher rates now, and refinance later when you’ve built up equity in your home.
Work With a Reputable Lender
If you’re considering buying a home and you are in need of a mortgage, be prepared. Learn common mistakes made that could keep you from getting your home. Making one of the mistakes above could throw a wrench into your plans and could also make the home buying experience stressful and difficult. Work with a reputable lender to make the home buying experience a success.