Buying a house is one of the biggest decisions of your life – and likely one of the largest financial transactions you will be a part of. To avoid financial disaster, you need everything to go smoothly, without surprises. This is particularly true when you’re shopping for the thing that is arguably just as important as the house – your home loan.
With low-interest rates (and the tacit assumption that they will be rising shortly), you may be desperate to get a home loan immediately.
However, it’s important not to rush. Here are some pitfalls to avoid when shopping for a mortgage:
Not Checking Your Credit Score
Your credit report is one of the first things that your lender looks at when you apply for a home loan. It helps them determine your creditworthiness. From paying off all your utility bills on time to taking care of credit card debts, make sure that there are no red flags on your credit report.
You also need to verify that there are no errors on your credit report. Through either error or identity theft, accounts may appear on your report for which you should not be responsible. You’ll need to have these errors fixed (along with documentation that you’ve done so) before applying for a home loan.
Choosing a Lender without Researching
Choosing the right lender is very important when opting for a home loan. Not only do costs vary, but you also want to know that the company you’ve chosen is trustworthy.
From attorney’s fees to title insurance, make sure you have evaluated different lenders’ offerings before choosing one. Ask for personal recommendations from friends and family to ensure they had a good experience. And, meet various lenders in person to get a better idea of who you may work well with.
Skipping the Pre-Approval Phase
The pre-approval phase involves going through the home loan application with a lender. From doing the paperwork to checking your income, your lender takes you through the entire process before you actually apply for the home loan.
Not only will this give you the assurance that your loan is likely to be approved, but having a pre-approval can strengthen your offer when trying to buy a home. It allows you to be well-prepared so there won’t be any surprises when you try to close the sale.
Opting for a Loan That Is Huge
Often, lenders will approve you for a larger loan than you should actually take out. When budgeting whether or not you can afford a certain priced home, consider all the factors: closing costs, property taxes, homeowner’s insurance, utilities, and maintenance.
Being overly optimistic about your ability to pay will not make financial sense and cause you stress. If you have doubts about your ability to pay for a particular house – along with your regular lifestyle expenses – you might want to opt for a more affordable option.
Signing Documents without Reading or Understanding Them
The documents related to home loans are quite lengthy and complicated, but you’re still responsible for everything that is in them once your name is signed on the bottom line. It is important that you read everything thoroughly before signing and if there is anything you don’t understand, ask a professional for help.
With a team of savvy financial experts, we at TILA Mortgage work hard to help our clients make better financial decisions. From helping you choose the right home loan plan to providing expert financial advice, our mortgage company in Seattle helps clients find the a great loan for their individual circumstance. Contact us to know more, and to find out how we can help you.