5 Mistakes Mortgage Shoppers Can Make
November 18th, 2014
November 18th, 2014
Are you shopping for a new home? Buying a home and getting a mortgage can be a big financial decision – as well as an overwhelming process. But you can learn from the mistakes of other homebuyers and borrowers, so you know what pitfalls you should avoid before you sign on the dotted line.
1. Not checking your credit score.
Mortgage lenders review your credit report to determine your creditworthiness and to decide whether they will offer you a loan or not, the amount of the loan amount and the interest rate. Once a year, you can get a free credit report from the three main credit bureaus: Experian, Equifax and TransUnion. So at least six months before you start hunting for a home, pull a copy of your credit report to see what your credit score is. Contact the credit bureaus about any errors listed on your credit report. Errors on your report can affect your credit score and the interest rate you’ll receive. The credit bureaus have 30 to 45 days to investigate and fix these errors.
2. Applying for new credit before or during the mortgage application process.
Since lenders will scrutinize your credit history, avoid applying for any new credit for about 12 months prior to completing a mortgage application and during the approval process. That means don’t open up a store card, apply for a car loan or anything. Otherwise you may appear as a greater credit risk. Also, don’t close any old accounts since this can affect the amount of credit you have available.
3. Not shopping around for the best interest rate and loan terms.
Check with a few lenders to determine the type of interest rate and loan terms you can expect. Also, ask each lender to share a breakdown of what the total closing costs will be, so you can compare their fees. Consider going with a mortgage broker like Grandview Lending in Indianapolis. The mortgage specialists at Grandview Lending can shop around simultaneously with various banks and lenders to find a loan with the lowest rate and best terms for your particular situation.
4. Not getting pre-approved.
Pre-approval for a mortgage means you’ve actually qualified for a home loan with the lender. During the pre-approval process, you go through the mortgage application process – you complete the paperwork, provide all of your financial information, go through the credit check, etc. Once the process is completed, the lender provides proof in writing that you’re qualified for a loan up to a certain dollar amount. The mortgage specialists at Grandview Lending can help you navigate getting pre-approved, completing the loan application and going through the loan process.
5. Forgetting to lock in your rate.
Mortgage rates change daily – sometimes several times a day. And a mortgage quote is just that – a quote – until you tell your lender to lock in the rate. So if you’re happy with your rate, get it locked in and put in writing. Once your rate is locked, it’s guaranteed for a specific time period – usually 7 to 30 days.
While these are just five of the most common mistakes home buyers make, become a savvy borrower, so you don’t pay more than you should or prevent your loan from closing. Educate yourself about the mortgage process.
If you have any questions, contact the mortgage specialists at Grandview Lending by calling 317.255.0062 or completing this online form. They’ll be happy to answer your questions and help you find the best mortgage for your needs.
Photo credit: iStockphoto/Cookelma
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