6 Mistakes to Avoid the First Time You Shop for a Mortgage Loan
Buying your first home is going to have a significant effect on your financial future. You need to get the best possible deal on a mortgage loan to set yourself on the right track and reach your full financial potential.
The following are five mistakes that it's important to avoid to get the mortgage loan that's best for your situation:
1. Not first researching the market and understanding current interest rates. At any given moment, there are standard interest rates set by the Fed that you need to be aware of if you're on the market for a mortgage loan.
While your particular credit score and income will inevitably influence the rates you're offered on a mortgage loan from a financial institution, you also need to be aware of the current market for borrowing and what a reasonable offer is at the time you're shopping for a loan.
2. Allowing the banker or representative you work with to talk you in to borrowing more than you need. If your credit score is strong and your income is high, you should definitely expect the loan officer or bank representative to try to talk you in to borrowing more than you need.
Set a budget and don't let yourself go over it to avoid runaway interest charges on borrowed money that you don't really need.
3. Failing to account for additional costs like taxes and insurance. While you may be able to afford the costs of your mortgage loan, remember that these aren't the only costs of home ownership. You'll also need to pay for property taxes and home insurance premiums, so factor these into the equation.
4. Allowing the loan term to be extended too long. Interest accrues over time, so the longer your loan term is the more you'll have to pay. Try to shorten your loan term if you can afford it to save money on the costs of home ownership over the long term.
5. Not taking the time to shop around online. You may feel reluctant to apply for a mortgage loan with many different financial institutions out of concern for taking hits to your credit score for each individual inquiry on your credit report.
While you should avoid too many inquiries on your credit report, you should take advantage of opportunities online to get a mortgage loan quote without having to officially apply. Inquiring with only one lender will probably lead to a mortgage loan that could have been more affordable if you had invested more into the search.
6. Neglecting credit unions and smaller banks. Credit unions and smaller banks often are able to offer lower interest rates, so don't neglect them during your search.
To learn more about this process, contact services like The Alan Smith Team - RE/MAX Professionals.