In this post, we want to share some common mistakes that homebuyers can make when they are applying for a mortgage.

7 Mistakes to Avoid When Applying For a Mortgage

1. Automatically dismissing the idea of an adjustable rate mortgage. A lot of homebuyers automatically decide on a fixed rate mortgage, and do not consider an adjustable rate mortgage (ARM). Sometimes, this decision is the result of having known someone in the past whose ARM ballooned out of control. If you plan to stay in your home for many years, it does make sense to go with a fixed rate mortgage in many situations. A fixed rate mortgage allows you to lock in a low, steady mortgage rate for the lifetime of the loan. But do you plan to stay in your home for only a few short years before you sell it again? In such scenarios, adjustable rate mortgages can be ideal. Their low introductory rates let you lock in short-term savings.
2. Taking closing for granted. Sometimes, a way into the home purchase process, homebuyers will feel like a sale is settled. Even though they have not yet closed on the property, they are confident that all will be smooth sailing going forward. They then decide to move forward with other plans. For example, homebuyers might take out another significant loan, or buy a lot of furniture. Sometimes, they will even go on a trip, or start the process of relocating between cities or across state lines. But sometimes, a purchase can fall through at the last minute. So, do not assume anything–You don’t close until you close.
3. Making large deposits. It is a bad idea to make large deposits during your loan application process. When you do, you will need to be able to document what they are and where they came from. In general, you can expect delays with this process, even if you are prepared. So, if you can avoid it, you should.
4. Not getting pre-approved. Did you get pre-qualified for a loan? That’s great—it’s a good starting point. You now have an estimate of what you can afford. But here is something you may not realize—mortgage pre-qualification only tells you what you may be eligible to borrow based on the information you provided. It is not the same thing as mortgage pre-approval, which tells you an estimate based on an actual check of your credit and income. Because an actual check is involved, mortgage pre-approval also signifies more. While it is not the same thing as a loan commitment, your pre-approval letter is still a statement from a lender saying that they would expect to approve you for a loan based on your information. Proceeding with shopping for a home and making offers with only a pre-qualification is a mistake, since a pre-approval empowers you more. It gives you a more concrete idea of how much home you can afford, and also enhances your bargaining power significantly.
5. Failing to explore different loan options. Even though there are many different types of mortgages out there, quite a few homebuyers do not realize that this is the case. They think that a mortgage is a mortgage, and that is that.But there are actually quite a few significant variations between different types of home loans. They vary in terms of qualification requirements, down payment requirements, and more. It is always in your interest to investigate the broad spectrum of mortgage products before you decide on a loan type. If you are unfamiliar with the different types of home loans available to you, we can explain each during your consultation.
6. Providing inconsistent information, or failing to supply information. Another common mistake when applying for a home loan is to provide inconsistent information, or to leave details out. Even if you think that certain details will be less than helpful to you on your application, it is important not to leave any gaps in information. Any information you fail to offer or provide incorrectly can hold up the application process. No lender is going to proceed without a full, consistent picture of your financial scenario.
7. Not being fully aware of the upfront cost of a mortgage. There are a number of costs that go with taking out a mortgage that homebuyers are sometimes unaware of at the time they apply. Not being prepared for those costs can lead to budgeting mistakes. You probably already know that most types of mortgages require a down payment. But are you aware of the closing costs? The fees that go with taking out a mortgage are generally packaged in with these costs. Fees can vary from one lender to another, so it is important to ask about fees early on in the mortgage process.

Grandview Lending is Your Mortgage Expert in Indianapolis

Grandview Lending, Inc. can walk you through the mortgage process step by step, helping you to steer clear of any pitfalls. To get started now, please call (317) 255-0062 to schedule your consultation. We are excited to help you buy a home in Indianapolis or elsewhere in the state of Indiana!