If You’re Shopping for a New Mortgage, Be Smart and Don't Make These Mistakes
Typically, February is the start of the house-hunting season. This year, according to my local real estate agents, the real estate market seems to be picking up. Home prices are still at their recession lows, but because interest rates are inching up, the buyers and sellers are now motivated to get closer together.
A house is probably one of the biggest investments you’ll make in your life, and mortgage payments will generally be the biggest monthly expense in your budget. If you’ve decided you want to shop for a house, it’s important to do your homework and evaluate all the options.
Try to answer the following questions: What is the quality of the neighborhood (location, location, location)? How is the offering price relative to comparable homes nearby? What are recent sale prices? What is the condition of the home? (Think black mold and radon.) And, what can I (we) really afford?
If you think you’ve found the house of your dreams, make sure to understand what the purchase, loan and maintenance costs will be. Analyzing the costs of homeownership ahead of time may seem easy, but if it’s your first real estate purchase there are many things you should consider and a few things you shouldn’t do before you sign on the dotted line.
A recent article on Yahoo News by Colin Robertson, lists ten major mortgage mistakes you should avoid making.
1. Not Knowing Your Credit Report Status or Your Score. If your credit score is bad then the interest rate you’ll get for any type of loan, including a mortgage, will be higher than the base rate. For any type of big-ticket purchase like a house or a car, you should check your credit report and score at least 6 months in advance. (A recent study showed that over 80% of credit reports have some sort of error on them.) That way you will have time to correct any mistakes or make positive changes in your borrowing behavior. Get your report for free at AnnualCreditReport.com. To get your score will have to pay about $10.
2. Applying for Other Credit at the Same Time as the Mortgage. Your credit score is affected by how much debt you have and what you’re applying for, so it makes sense to hold off on applying for a new credit card or any type of loan until after you’ve been approved for the mortgage.
3. Not looking at the entire cost of the mortgage and monthly payments. Depending upon your down-payment and your credit worthiness, you may have to pay additional insurance along with the principal, interest and taxes each month. Know what your “all-in” monthly cost will be.
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