There is only a small percentage of home buyers that are going to pay cash for their house. That means the majority of people are going to be obtaining a mortgage.
The process of signing a mortgage can be complicated and overwhelming. And on top of it, people will come out of the woodwork to try to give you advice.
However, it’s important that home buyers remember that not all advice is good advice. With that in mind, here is some of the bad mortgage advice that you always want to avoid.
While it’s true that the process could be slightly easier to obtain a mortgage from a bank that home buyers already have an existing relationship with, it isn’t always the best idea. When you are ready to look for mortgages it is important that you shop around and compare lenders. If you just go with the bank that you are already using you might end up spending more money in the long run through additional fees and higher interest rate.
Do not ever assume that your existing bank is going to automatically give you the best rate. Always talk to several lenders to find out who has the best program for you.
Pre-approval is an important step in the home buying process. Meeting with the lender to walk home buyers through this process is going to help you determine how much of a budget you can set for your home search.
Being pre-approved also shows sellers that you are serious about the process and that you are a legitimate buyer. If you end up in a bidding war with other buyers, being pre-approved can help put you above other buyers that aren’t because it shows the seller that you are a safer bet.
This piece of advice seems like it makes sense because you don’t want to pay more than necessary on your mortgage. However, just because one lender can give you the lowest interest rate does not mean that it is really the best deal for you.
There are many different loan programs available for home buyers. If you’re in a different loan with a higher rate your payment could still end up being less then if you just choose the lowest rate. This is why it is important to look at all factors of the loan, as well as looking at the overall cost of the loan – not just the interest rate.
Just because a lender will approve you for a certain dollar amount does not mean that that is the dollar amount that you should choose to spend. Before you even meet with the lender take the time to think through your budget in order to see what you are comfortable spending each month.
You will need to pay your mortgage payment, property taxes, and homeowner’s insurance. You will also want to have enough money afterwards to be able to put aside for the unexpected repairs and maintenance that will need to be done on the house.
This is why you don’t want to spend more than you can actually afford and end up house poor. Lenders do not factor in the lifestyle that you like to live; they are only looking at the numbers. It’s up to you to determine the rest.
Doing your research before getting a mortgage can really help home buyers in the long run. It’s important that you work with an educated lender that is going to answer your questions and not just tell you what they want to say. Make sure you ask questions about the type of programs that are available to you and then always read the fine print.