Mortgages are complicated, almost excessively so, but you need to be careful when applying and shopping around for one. If you are looking for a mortgage, be sure to look out for these common mistakes. Each one can result in you getting a worse mortgage, or no mortgage at all.
1. Credit Checks: Too Few or Too Many
Credit is a curious thing. Naturally, you’ll need to know your credit score. It tells you what kinds of mortgages you can expect, and which ones are far below or above you. But checking your credit score too much can also affect it. Essentially, the logic is that if multiple banking institutions are checking your credit score, you are in over your head. Of course, this could also mean that you’re just being thorough in your search for a mortgage, but that isn’t how the credit checkers see it. So be sure to check your score, but don’t have it checked too often.
2. Forgetting About Extra Costs
Your mortgage payment can be broken down into three main categories: the principle, the interest, and the extras. The principle is the actual amount of money you owe, slowly chipped away with each successful payment. The interest is the money you owe on top of the mortgage. The extras include things like property taxes and insurance, and many people forget these even exist. Always factor the extras into your prospective mortgage payment since the amount could come as a surprise.
3. Not Shopping Around
While this may seem counterintuitive given the “watch how many time you check your credit” warning, but you don’t want to go with your first mortgage offer. Shop around a little to get a feel for what people can offer you. This can be approximated without a credit score, so don’t be afraid to see what other institutions can offer. There are benefits and drawbacks for going to a bank or a mortgage broker, so balance these with whatever works best for you.
4. Not Going for a Locked Rate
Mortgage rates are one of the big selling points for banks and mortgage brokers, and many will try their best to give you the lowest number possible to woo you to their institution. But be wary of the tricks they will pull to make that number appear lower, even when it will actually be higher. One of the most common ways to do this is shorten or eliminate the fixed rate, meaning your mortgage rate will fluctuate and you’ll have no control over it. Be wary of institutions who try and cover up the fixed rate length. After all, it makes their initial number meaningless is it only changes in a few short months.
Finding the perfect mortgage is a long and involved process, but it is possible. Be sure to avoid these common mortgage mistakes and you’ll be closer to having a mortgage that works for you, now and into the future.Posted by Gurpreet Ghatehora on