One of the biggest mistakes made when it comes to mortgages loans is assuming all loans are created equal. Just as every person has a different style of home they like, mortgages are also very different. The reason is that while situations may be similar, we all have different incomes, different debts, and other factors that need to come into play. Once the right loan has been established, it becomes the new homeowner’s responsibility to ensure everything with the mortgage is right.
For instance, it is common to find small annoyances with mortgages. While not difficult to fix, they can be time-consuming. However, big mistakes can also occur, leading to financial disaster. Therefore, the first thing you want to do is accept responsibility for reading the fine print, asking lots of questions, and pointing out things that simply do not make sense. Remember, while a good lender and real estate agent will have your back, the bottom line is that you have to make sure the mortgage loan and paperwork is accurate.
Unfortunately, many homebuyers make major mistakes, costing them dearly. For starters, in addition to choosing the right mortgage loan, you also want to make sure that qualifying ratios never get out of control. While mortgage lenders are more flexible than they used to be, especially when it comes to the amount of house you can afford, you need to understand the ratios being used for your qualification. The problem is that on paper, the qualification may look great for you settling into a $350,000 home but once in the home, you soon find yourself in foreclosure because you cannot realistically afford it. Therefore, you need to do the math based on YOUR budget, not the budget the lender established based on industry standards.
Finally, make sure you have the right amount of down payment to make a difference. Generally, people will put anywhere from 5% to 20% down on the home. Obviously, the more you can put down, the less financing, which means less interest, and a more affordable monthly payment. However, a better down payment also means securing a better interest rate, which would make a huge difference on the bottom line. Therefore, while you might want to get into a home right away, it might be to your betterment to wait a year or two so you can put down more money.