Mistakes to Avoid When Obtaining a Home Loan

Applying for a home loan is the most overwhelming part of the home buying process. Most people have to plan for months in advance before submitting the application letters. Your home loan application process will go much smoother without the following major mistakes:

Limiting Yourself to One Type of Loan

Don’t assume that the only home loan available to you would be a fixed rate loan, much like the one your parents had. There are multiple options available these days when it comes to getting a home loan. You can choose a fixed rate of interest or even go with a variable rate to take advantage of market fluctuations. You can even obtain your home loan as an investment loan. What’s really important here is that you spend some time shopping for the best loan option. Do your research and get professional help if you need it.

Not Asking an Expert for Help

The home loan market can be complex for a lay person to understand. It’s perfectly normal if you are confused about all the clauses and financing options lenders require from borrowers. You could not even be aware of alternative options you can try with a home loan. That’s why hiring a reliable broker, like a Will Bell mortgage broker, is important in the pre-purchase process. These home loan experts can tell you what’s available and how to calculate your ability to repay a loan. The professionals might even help you prepare your application to increase your chances of getting approved for the loan you need.

Not Having a Household Budget

Are you shopping for a home loan without considering your how your current income stands against expenses? That could be a major mistake. No matter how big or small a home loan is your current income should be able to support the monthly payments. Therefore, you need to budget all your expenses and add in a potential mortgage payment (after excluding current rent). See if you can afford the payment with all of the other expenses. The payment you can afford will determine your overall housing loan value.

Not Calculating the Rate in Advance

Do you really understand the APR that comes with your home loan? You can have the APR as a fixed or a variable rate. In either case, you need to read the fine print to understand how much this would cost. The true cost of your mortgage should be calculated with the APR in mind.

Ignoring Lender Fees

Some lenders may advertise low annual interest rates. But be aware that there might be hidden fees associated with the loan that could make it even costlier than a high APR. Keep in mind that there will be certain fees you have to pay at the start of the housing loan process. These would add to the amount you have to pay for. However, pay careful attention to fees that may end up recurring each year. These fees can make your mortgage very costly.

Not Saving for the Down Payment

You must have at least 20 percent of the mortgage save dup to present as the down payment. It’s not possible to obtain a home loan without a certain amount of down payment to cover the initial costs. The down payments also reduce the cost of the mortgage on the loan run. Therefore, plan ahead to save up for this. A solid down payment would make you a very desirable borrower to the lenders.

If you are still on the process of obtaining a home loan, make sure you avoid the above mistakes.

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