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Monday, September 1, 2014

Don't Make These 7 Home Mortgage Loan Mistakes

Are you making mortgage mistakes?

There are a number of mistakes you can make along the way of getting your mortgage loan approved and once you have a loan.  Buying a home is complex enough but when it comes to financing, you need to make sure you are as prepared as possible in order to get a loan and make the payments.

1. Don't lie on your loan application: 

Exaggerating your income on a mortgage application or putting down other untruths can be a federal offense. Lenders rarely prosecute liars but if they find out later, they can call your loan due and payable. Don't ever sign your name to a loan application that is not completely filled out, either. Loan officers have been known to stretch the truth to get a client approved, but it's the borrowers who end up paying the price, often in the form of monthly loan payments they can't afford.

2. Don't confuse "pre-approved" and "pre-qualified" with a loan commitment: 

When you are "pre-qualified," the lender is making an educated guess about how much you can borrow based on information you've provided. When you are "pre-approved," the lender has verified everything you've provided and is offering to lend you up to a given amount at current interest rates -- under certain conditions. It's much better to be pre-approved when shopping for a home because both you, your real estate agent and the seller know what you can afford. Whether pre-qualified or pre-approved, final clearance and a check at closing -- a loan commitment -- are subject to an appraisal satisfactory to the lender, good title, a last-minute credit check, and other verifications. When meeting with lenders, always ask what additional steps will be required to obtain a loan.

3. Don't have too much credit: 

Excessive credit is almost as bad as no credit or even bad credit. Even if you pay your bills on time, lenders tend to focus just as much on how much credit you have available to you and your debt-to-income ratio as they do on timeliness. So being up to your ears in car loans and credit cards is a sure way to be turned down for a mortgage. Postpone any big-ticket purchases until after you buy your house.

4. Don't choose the wrong mortgage: 

Home loans may no longer be the lifetime obligations they used to be but still -- you don't want to be saddled for even a short period of time with the wrong one. Investigate all of your options, then lay your choices side-by-side and do the math, making sure to compare worst-case scenarios. Be sure to look at down payment, initial interest rates, future interest rates and payments (if different), mortgage insurance, and the possibility, though now rare, of prepayment penalties.

5. Don't burn your mortgage: 

It's a wonderful feeling when you make your last house payment. After all, the place is now yours, all yours. Many people celebrate by holding a mortgage burning party. But they torch the original document. Don't. Make a copy and burn that instead. Keep all your loan docs in a safe place.

6. Don't dodge the lender if you can't make your payments: 

Lenders have many options at their disposal to help keep borrowers from losing their homes to foreclosure. But they can't do anything for you unless they can talk to you about your difficulties. Lenders are the enemy only if you give them no other choice. The worst thing you can do is ignore phone calls and letters from your lender when you are behind on your payments.

7. Don't refinance just to get a lower interest rate unless you plan to stay long term:

Every time you get a new loan, which is what refinancing is, you have to "close" again. Every closing comes with closing costs.  High loan closing costs can outweigh the benefits of lower rates if you plan to move soon.

If you are refinancing to pull equity out of your home or roll in some other debt, think twice.  Without any equity, you could be in a world of trouble if a life change forces you to need to sell quickly.

Looking for a reputable mortgage professional to help you through the process?

Have more questions?  Call me!

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