Mortgage qualification is usually something that first-time homebuyers worry about, and neophytes will often make mistakes that can cause stress and financial ruin down the line. However, mortgage qualification issues can be avoided, as can many common mortgage mistakes that many first-time homebuyers make in attempts to own the home of their dreams. Here, we will discuss the most common mortgage mistakes that you should never make.
Becoming Impoverished Over Home Ownership
Many new home buyers will make the mistake of investing most of their money into home-related expenditures to pay it off faster and increase its real estate value for resale.
However, the issue with spending too much on home-related expenses will invariably mean that you will have very little money to spend on other things, such as repairing or replacing an old automobile, or saving for college tuition or retirement.
The golden rule is to spend less than 28% of your income (before tax) on home-related expenses. By following this rule, you will be able to determine the amount that you can realistically afford to pay on your new home before moving in.
Ignoring the “Real” Costs of Owning a New Home
When buying a new home, there may be some additional expenses that you may be unaware of. For instance, home maintenance and repair costs will quickly add up over the years, such as needing to have your furnace serviced, or having to buy a new water heater.
In addition, the larger the home is, the more you will likely have to spend for its upkeep, and the same applies to the older your home is as well.
Homeownership costs will also rise each year, thanks to property taxes. In fact, being in certain “danger zones” will require certain forms of additional insurance. For instance, if you live in a flood hazard area, then your lender will also demand that you obtain flood insurance.
Not Shopping Around for the Best Deal
Many first-time homebuyers are eager to purchase a new home, and may not take the time to shop around to get the best mortgage deal on the market. That is, by taking the time to compare and contrast different offers, you may be able to save several thousand dollars, if not tens of thousands of dollars, in the form of interest and fees over the lifespan of your loan.
Ignoring Annual Percentage Rates
Another common mistake that many people make is that they will choose a lender that advertises a low-interest rate without reading all of the terms and conditions of the loan. For instance, some lenders may entice people to sign on with them by offering low-interest rates, while also charging exorbitant fees to compensate for said “low-interest.”
As such, you should look into the annual percentage rate, as it will include the fees that the lender will charge, and will show you the actual total cost of the loan in question. If you would like to learn more about mortgage qualifications and common mortgage mistakes, please visit our website.