Top Mistakes to Avoid When Applying for a Mortgage
If you’re in the market for a mortgage, you’ve probably heard about new regulations and requirements. The government implemented these rules to make sure that borrowers like you can get the best rates possible while also avoiding taking on too much debt. But as with any big change, there have been some growing pains along the way—and some people have found themselves on the receiving end of those pains (or worse). I want to go over some of the most common mistakes that home buyers make when applying for their mortgages and how you can avoid them so that your experience ends up being smooth sailing from start to finish.
Not working with a broker you trust and like.
The best way to ensure that you get a good deal is to work with a mortgage broker that you trust and like. If they are responsive, professional, and helpful in their communication with you, then there’s a good chance they will be able to help you find an option that suits your needs without charging too much in fees or requiring unnecessary paperwork. You’ll also feel comfortable recommending them to friends and family who might need mortgages themselves in the future!
Not knowing your credit score.
The first step to getting the best mortgage is knowing your credit score. It’s the most important factor brokers use to determine whether or not you are eligible for a loan, and it can also help you decide which type of mortgage would be best suited for your needs.
Many people don’t know their own credit scores because they don’t check them regularly or at all. If this sounds like something that could happen to you, take some time now and figure out what number appears when someone pulls up your report–it should be somewhere between 300-850 (the higher the better). You can get an estimate from one of many websites that offer free reports from each of the three major credit bureaus: Experian, Equifax and TransUnion.
Not being honest about your debt and expenses during the application process.
- Don’t lie about your debt and expenses during the application process.
- Don’t hide debt or expenses.
- Don’t hide assets (like savings, investments, property).
- Don’t lie about your income or employment status.
Being unprepared for closing costs.
The closing costs are the fees associated with closing on a loan. They’re required by law, and they can’t be avoided.
You may think that your mortgage company will simply deduct these fees from your down payment or escrow account, but they won’t–you’ll have to pay them at closing. This means that if you don’t plan ahead for this expense, it could put a serious dent in your savings (or even cause you to lose some).
Ignoring the new Mortgage Interest Tax Deduction limits.
The new tax law limits the amount of interest you can deduct on your taxes. The limit is $750,000 and this is a big change from the previous law which allowed you to deduct all interest.
If you are planning on buying a home anytime soon and plan to use an FHA loan, then this will affect how much money you save in taxes each year.
You can avoid these mistakes if you work with a broker who will guide you through the process, make sure your credit score is right, and get you the right loan
If you’re applying for a mortgage, there are some common mistakes that can cost you thousands of dollars.
If you work with a broker who will guide you through the process, make sure your credit score is right and get you the right loan for your situation, these mistakes become less likely:
- Working with a broker who has all the answers-but not necessarily the one who will be there when things go wrong.
- Knowing what brokers look for in an application and being honest about it during the application process (i.e., no hiding debt or income).
- Applying for the right loan (i.e., not getting one that’s too big or too small).
- Being prepared for closing costs (and getting pre-approved).
If you work with a broker who will guide you through the process, make sure your credit score is right, and get you the right loan, then these mistakes can be avoided.