The 5 most common mistakes to avoid when applying for a mortgage
One of the biggest financial decisions you'll make in your lifetime is applying for a mortgage. But with so much at stake, it's easy to make mistakes that could cost you thousands of dollars or even cause you to be denied for a loan. Here are the five most common mistakes to avoid when applying for a mortgage:
Not checking your credit score and report. Your credit score and report play a major role in determining whether you'll be approved for a mortgage and what interest rate you'll be offered. Before you apply for a mortgage, be sure to check your credit score and report to see if there are any errors or areas that need improvement.
Not comparing lenders and loan offers. Don't just go with the first lender you come across – shop around and compare offers from multiple lenders to see which one offers the best terms and rates. Don't forget to consider online lenders as well, as they often have competitive rates.
Not having a down payment saved up. Most lenders require a down payment of at least 20% of the home's purchase price. If you don't have a down payment saved up, you may have to pay for private mortgage insurance (PMI), which can add to your monthly mortgage payments.
Not budgeting for closing costs. In addition to your down payment, you'll also need to budget for closing costs, which typically range from 2-5% of the home's purchase price. Closing costs include fees for things like the loan origination, property appraisal, and title insurance.
Applying for new credit before closing. Once you've applied for a mortgage, avoid applying for any new credit – such as a credit card or car loan – until after you've closed on your home. This is because each time you apply for credit, it can cause a hard inquiry on your credit report, which can lower your credit score and potentially cause your mortgage application to be denied.
In conclusion, applying for a mortgage is a big financial decision that requires careful planning and consideration. By avoiding these common mistakes, you can increase your chances of getting approved for a loan and securing the best possible terms and rates.