5 Mortgage Mistakes to Avoid When Looking For a Home Loan
As much as you would derive satisfaction in owning a dream home, not everyone can afford to pay for his or her home upfront. A mortgage becomes the best alternative. It is usually a significant debt, making it quite necessary to think it through carefully and make only wise decisions in the process. Getting a mortgage broker is one way of ensuring that you get the best home loan and avoid costly financial mistakes. Some of the mistakes you should avoid when buying or investing in property include:
Mortgage mistakes to avoid
Getting a mortgage that you cannot afford
One common mistake when looking for a home loan is committing too much of income to the mortgage. The result of this is that you will be left with insufficient amounts of money for other things such as saving for retirement, replacing old car, kid’s college fund and many others. You probably will not even be able to furnish the new house that you are getting. A general guide is to spend less than 28% of your income before tax.
Not factoring in the real cost of home ownership
First-time buyers may be so surprised by all the other expenses that come with owning a house. Such costs include regular maintenance and unglamorous purchases such as water heater. Property taxes may also affect the amount that you get to spend on your home. For some cases, you will need to factor in the insurance on the home as well. All these costs should be carefully considered and factored in when getting a mortgage.
Failing to shop around for the best mortgage
The number of lenders or mortgage agents has been increasing in the recent past. As such, they all offer different terms for different situations. Shopping around is the only way you can determine who offers the best deal for your particular case. Ensure that you get quotations from all the probable lenders and conduct a thorough comparison. Be careful as some lenders may advertise lower annual percentage rates, then make up for them in the fees charged. A good mortgage broker may help you access and analyze the best deal and its suitability for you.
Failing to make any down payments
To get the best rates from most lenders, you need to put at least 20% upfront payment. It may help you avoid paying for mortgage insurance, which usually protects the lender and not you. It also increases the amount of equity that you own in your home or reduce the amount that you owe the lender.