A house is probably one of the most expensive investments you will make in your life. Most homes today start at $150,000 and go up from there. Given the fact that the average American makes about $33,000 each year, it is easy to see that making a mistake with your mortgage can lead to years of financial strain that could last for the rest of your life.
While many experts will give you advice on how to apply for a mortgage, few tell you what things you should avoid. Knowing what not to do is just as important as knowing what to do. Here we will go over a number of mortgage mistakes you should avoid at all costs; doing these things will cost you dearly.
The first thing you don't want to do is choose the wrong mortgage. Many people have fell victim to lenders who care more about earning a high profit than with making sure their clients get an affordable home. Many lenders have now started allowing people to quickly refinance their homes, and people are finding themselves with interest rates that they can't afford. While it is hard enough to pay off a $9,000 credit card, getting stuck with a $200,000 home at a high interest can be much worse.
Another mistake people make is confusing pre-qualified loans with pre-approved loans. One problem with the real estate field is that different terms mean different things depending on whom you talk to. Pre-qualified generally means that a lender is making a solid guess based on information you've provided.
Being pre-approved means that the lender has done research on your credit background, and is certain that you can be approved for specific type of loan. As you can see, there is a clear difference between the two. If you get a loan that you are "pre-qualified" for, you may find yourself with a loan that is more than you can handle. When you talk with lenders, make sure you understand the terms.
Another mistake made by people is having too much credit. It has been said that having large amounts of credit can be as bad as having bad credit. The reason for this is because having too many loans makes you a risk to lenders. Even if you pay your bills on time, many lenders feel that you can easily default on your loans. If you have a lot of credit, pay of some of your loans before applying for a mortgage.
The next serious mistake people make on their loans is putting false data on their applications. Putting down more income than you actually earn can be in violation of federal laws. Even though people who do this are rarely taken to court, lenders can call in your loan if they feel you have lied on your application. The lender may also exaggerate data on the application, and this could hurt borrowers as well.
One mistake people make when they get into financial trouble is to run from the creditors. Many lenders have options for helping homeowners who are behind on their payments, but if you don't work with them, there is little they can do to help you. Even worse, you may be reported to a credit agency and your home could be taken. Lenders can be a headache if you choose not to work with them.
Not getting your home inspected is another mistake which can cost you a large amount of money. Many people make the mistake of getting a loan before they check to make sure the home is in excellent condition. Hiring a professional to inspect your home may cost you a few hundred dollars, but can save you thousands in the long term.
Joseph Kenny writes for the Personal Loans Store and offer more information on secured loans and other loan topics available on site.
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