There is no doubt that a home is a major investment in terms of time and money. Of course, for the vast majority of people buying a home means finding a mortgage, and shopping for a mortgage is one of the most difficult financial decisions most people ever make. It can be difficult to know what to do, and mistakes are common. This article focuses on some of the most common mortgage shopping mistakes and what home buyers can do to avoid them.
One place many home buyers go wrong is choosing the wrong mortgage provider. Many first time mortgage shoppers make the mistake of choosing the mortgage provider who quotes the best rate, but failing to get that rate guarantee in writing. It is essential to get any promised interest rate in writing in order to protect yourself from getting burned if interest rates rise.
It is also a mistake to not shop around enough for a mortgage. After all, choosing a mortgage is a long term commitment, probably one that will last for several decades. It makes sense, therefore, to spend at least as much time shopping for a mortgage as you spend looking for a home. Too many people spend months shopping for a home, only to spend a much shorter period of time shopping for the prefect mortgage.
It is important to shop for the home mortgage loan at local banks, national banks, credit unions, savings and loan associations and mortgage brokers. Failing to shop around for a mortgage is a significant mistake, and definitely one to avoid.
It is also a mistake to accept a verbal assurance from a mortgage lender that the interest rate has been locked in. Unfortunately, some mortgage lenders try to make an additional profit on the loan by not locking the rate in, hoping that interest rates will fall by the time the loan closes. If interest rates rise instead, however, the borrower could be left holding the bag on the higher rate. It is important, therefore, to get any interest rate quotes in writing in order to protect yourself.
It is also important to avoid taking out any large loans, or making any significant financial commitments, before shopping for a mortgage loan. That is because prospective lenders will review your outstanding debt carefully, and having too much outstanding debt can make you look like more of a risk. That could result in you having to pay a higher than necessary interest rate, or even being turned down altogether for the mortgage you need.