9 mistakes too many Americans make when trying to get a mortgage



MarketWatch has highlighted these products and services because we think readers will find them useful. We may receive a commission if you purchase products through our links, but our recommendations are not dependent on any compensation we may receive.

Mortgage rates are still very low (compare today’s mortgage rates here), and some experts expect them to grow up soon, prompting many Americans to consider buying a home. But be prepared: the mortgage process can take anywhere from 30 days to months, requires tons of paperwork, and besides, getting a loan permit is far from a reliable process. However, this is all doable and can even go smoothly, especially if you avoid some of the most common mortgage mistakes when applying for a mortgage.

Mistake # 1: you didn’t check your credit report before applying for a mortgage.
Greg McBride, chief financial analyst at Bankrate, says the first mistake people make happens even before they apply for a mortgage. “It’s the inability to check your credit reports for possible errors. Incorrect and offensive information can undermine your credit rating and your chances of getting approval, ”McBride says. One easy and free way to check your credit score: subscribe to CreditKarma; you can get a free credit report at AnnualCreditReport.com.

Mistake # 2: you haven’t made enough purchases
Not shopping with lenders is a serious mistake that can cost thousands of dollars. “On a $ 300,000 loan, a half a percentage point lower interest lost will cost you almost $ 1,000 in additional interest each year,” McBride says. This is why he recommends receiving quotes from at least three lenders… And don’t just compare interest rates: see also fees, terms and more. “Shopping can also provide significant savings in closing costs,” McBride says.
(You can find lenders with the best rates here.)

Mistake # 3: You’ve been seduced by lower ARM scores, but this isn’t exactly the right choice for you.
“There are times when ARM may indeed be the optimal choice, but the difference between ARM and fixed rates is small today, so even then there is no good risking ARM, especially when you can lock in fixed rates. below 3%, ”says McBride. However, in general, an adjustable interest rate (ARM) mortgage may make sense for borrowers who plan to live in the home for only a few years or know they will pay off the loan within a few years.
(You can find lenders with the best fixed rate and ARM rates here.)

Mistake # 4: you forgot to unfreeze a loan when applying for a loan.
If you forget to unblock or unfreeze your loan, if it is blocked or frozen, before applying for a loan may delay the mortgage process. “It is important to understand the time frame in which your loan will be unblocked or unfrozen so that your loan can be received in advance. If you have frozen your loan in order to control how the credit agency can share your data, the lender will not be able to extract your credit history and assign points to assess your creditworthiness, ”says Alfredo Padilla, an official. for home loans Wells Fargo. Unfreezing a loan can take from a few seconds to several days, but if it unfreezes before applying, lenders will be able to view your credit rating.

Mistake # 5: You spent free or changed jobs while waiting for loan approval.
Home buyers beware: “Don’t go out and buy a bunch of furniture on credit before your loan is closed. Don’t buy a car, quit your job, or change your financial position before closing, as that approval could be ripped out of you, ”McBride says.

Mistake # 6: you have irregular activity in your bank account.
Large deposits that come in, but are not part of your normal depositing activities, can be alarming to the lender, who may think that you have borrowed this money. Even if you are just depositing your own money into your account, the lender will most likely ask questions that could delay your mortgage.

Mistake # 7: You went the paper route without realizing the potential downsides.
There are advantages, including potentially more privacy, in choosing to send all of your documents as real papers, rather than allowing the mortgage company to process information online, even if it is through a secure dedicated web address. But Padilla says that if you go digital, you’ll need to manually submit documentation for your income, employment, asset accounts, and liability accounts. “This may require you to download the account statements and send them to the lender by email, post or other manual method,” says Padilla, “which can be time consuming and more error prone.

Mistake # 8: You thought buying discounted points was always the best solution.
Discount points or mortgage points are basically similar to prepaid interest; you pay the lender upfront for the discount points to then lower your interest rate and therefore your monthly payments. Many people think this is the smartest way, but it really depends on how long you stay in the house. Here calculator this will help you figure out if it is worth buying points.
(You can find lenders with the best rates here.)

Mistake # 9: You change the way you hold your title at the end of the game.
If you add or remove anyone from a title or trust deed, report it to your lender immediately. “It’s best to tell your lender early in the process exactly how you want the title or trust deed to be read so as not to delay the approval of the mortgage. Let them know what names and spellings are, and whether it is sole proprietorship, joint tenant, joint lease, or some other legal agreement, ”Padilla says.

Also see: 7 things to do now to get ready to buy a home


Source link