If you're preparing to buy your first home, you'll more than likely need to take out a mortgage. The process of applying and getting approved for a mortgage can seem a bit daunting, but with the right guidance from your real estate agent and a little foresight, you can end up with a home loan that works for your needs. Specifically, as you apply for your first mortgage, there are a few common mistakes you'll want to be careful to avoid.
Not Knowing Where You Stand
Before you even start your mortgage application, it's important to pull a current copy of your credit report so you can get a better idea of where you stand financially. Also be sure to review your credit report for mistakes or errors that you can dispute and have resolved before applying for a mortgage. The better informed you are about your credit, the easier the rest of the process will be.
Choosing the Wrong Loan Type
There are so many different types of mortgages that choosing one can be very overwhelming. Sometimes, your real estate agent can help guide you in the right direction, but it's usually best to consult with a loan advisor or financial advisor to be sure. There are a wide range of options to suit your needs, such as FHA mortgages (with low down payment requirements) for first-time buyers, conventional mortgages, and even VA loans for military veterans.
Failing to Shop Around
No matter which type of mortgage you settle on, there are likely to be multiple lenders who offer the type of loan you want. Make sure to submit pre-approval applications to at least a few of them to get a better feel for which lender can provide you with the best terms and lowest interest rates. Otherwise, you could be leaving money on the table.
Making Big Purchases Before Closing
Even once you have a mortgage pre-approval and have an offer accepted on your first home, your mortgage could fall through if there are any major changes in your credit. For example, if you choose to open up a credit card and spend $15,000 on new furniture for your home just before your closing date, this could affect your credit to the point of your approval falling through. For this reason, it's best to avoid major purchases or even changes in your job until after closing on your home.
Contact a home loan company to learn more.