9 mistakes too many Americans make when trying to get a home loan
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Mortgage rates are still very low (compare today’s mortgage rates here), and some experts expect them to rise soon, prompting many Americans to consider buying a home. But be prepared: the mortgage process can take anywhere from 30 days to several months, requires a ton of documentation, and on top of that, getting approved for a loan is far from a foolproof process. That said, everything is doable and can even go off without a hitch, especially if you avoid some of the more common mortgage mistakes when applying for a mortgage.
Mistake # 1: You Didn’t Check Your Credit Report Before Applying For A Home Loan
Greg McBride, chief financial analyst at Bankrate, says the first mistake people make is before they even apply for the mortgage. “He doesn’t check your credit reports for any errors. Incorrect information of a derogatory nature can torpedo your credit score and your chances of being approved, ”says McBride. A free and easy way to check your credit score: sign up for CreditKarma; you can get your free credit report at AnnualCreditReport.com.
Mistake # 2: you haven’t shopped enough
Not shopping around with lenders is a major mistake that can cost thousands of dollars. “On a $ 300,000 loan, missing out on a rate half a percentage point lower will cost you almost $ 1,000 in additional interest each year,” says McBride. That’s why he recommends get quotes from at least three lenders. And don’t just compare interest rates – also look at fees, terms and more. “Shopping can also generate significant savings on closing costs,” says McBride.
(You can find the lenders with the best rates here.)
Mistake # 3: You’ve gotten yourself into the lower rates of an ARM, but it’s not quite the right choice for you
“There are cases where ARMs may indeed be the optimal choice, but the difference between ARMs and fixed rates is small today, so even in these cases there is little benefit to taking the risk of an ARM, especially when you can lock in fixed rates below 3%, “says McBride. That said, in general, variable rate mortgages (ARMs) can make sense for borrowers who plan to live in a home. only for a few years, or who know they will pay off the loan in a few years.
(You can find the lenders with the best rates on fixed rates and ARMs here.)
Mistake # 4: You forgot to unblock your credit when applying for a loan
Forgetting to unlock or unblock your credit if it is frozen or frozen before you start a loan application can delay the mortgage process. “It is important to understand the time frame during which your credit will be released or unlocked so that your credit can be withdrawn from the start. If you have frozen your credit to control how the credit agency can provide your data, the lender will not be able to extract your credit history and score as part of the assessment of your creditworthiness, ”says Alfredo Padilla, a spokesperson. for Wells Fargo home loans. It can take anywhere from seconds to days for a credit thaw to unfreeze, but as long as it’s unfrozen before you submit an application, lenders will be able to view your credit score.
Mistake # 5: You Spent Freely, Or Switch Jobs, While Waiting For Loan Approval
Homebuyers, beware: “Don’t go out and buy a pile of furniture on credit until your loan closes. Don’t buy a car, quit your job, or change your financial situation until you close because that approval could be taken away from you, ”says McBride.
Mistake # 6: You have irregular activity on your bank account
Large deposits that are not part of your regular deposit activity can alert a lender, who might think you have borrowed that money. Even if this is just putting your own money in your account, the lender will likely ask questions, which could delay your mortgage.
Mistake # 7: You’ve taken the paper route without realizing the potential drawbacks
There are benefits, potentially including more privacy, to deciding to submit all of your documents in paper form, rather than allowing the mortgage company to process the information online, even if it’s through a web address. secure and dedicated. But Padilla says if you opt out of the digital path, you’ll have to manually submit documents for your income, employment, asset accounts, and liability accounts. “This may require you to download account statements and submit them to the lender electronically, by mail or other manual methods,” says Padilla, which can be time consuming and more prone to errors.
Mistake # 8: You Thought Buying Discount Points Was Always The Way To Go
Discount points, or mortgage points, are basically like prepaid interest; you pay a lender up front to get discount points so that you can then reduce your interest rate and therefore your monthly payments. A lot of people think this is the smarter way to go about it, but it really depends on how long you are at home. here is a calculator this can help you determine if you should purchase points.
(You can find the lenders with the best rates here.)
Mistake # 9: You change the way you want to keep the title at the end of the game
If you add or remove someone from the title or trust deed, be sure to notify your lender immediately. “It’s best to tell your lender early in the process exactly how you want the title or trust deed to read so you don’t delay mortgage approval. Let them know what the names and spelling are and if it’s a single property, common tenants, shared tenancy or some other legal arrangement, ”says Padilla.
Also see: 7 things you need to do now to prepare to buy a home