Buying your first home ought to be one of your greatest joyous milestones, yet too many prospective homebuyers make widespread mortgage mistakes that can lead to financial ruin. Doing so can jeopardize homeownership dreams and finance, but perhaps the worst part is how many such mistakes are so easily avoidable with a little forethought and planning. Making the wrong choice in a home mortgage lender or loan company is just the first step in the long journey towards owning your own home. Don’t Make These Mistakes before you apply for a home mortgage.
One of the most common mortgage mistakes homeowners make is submitting their loan application to the lender with the lowest interest rate or fee. Mortgage lenders commonly set a fixed mortgage rate for new borrowers and will often not adjust to fluctuations in the economy. Many consumers believe that locking in their mortgage rate at the prime lending rates is a secure way to purchase their first home. However, if interest rates unexpectedly fall below the prime rate, the lender’s resulting mortgage rate may be quite unfavorable. Besides locking in mortgage rates at their present level, some consumers make the mistake of paying little attention to the Annual Percentage Rate (APR) when they shop for a home purchase loan.
The term “Annual Percentage Rate” is what consumers hear about when they apply for a mortgage. They are usually confused because they are not used to comparing interest rates directly. The APR refers to the interest rate over the course of a year. The lower the mortgage rate over the course of a year, the lower the interest rate you will pay on your loan. To determine the best mortgage rate for your individual situation, make sure to do your homework and gather all the relevant information.
Often borrowers make the mistake of taking the lender’s Annual Percentage Rate as their sole guideline for choosing a mortgage loan. While many mortgage companies have their own proprietary interest rate, this APR will not provide you with enough information to make an informed decision. This APR should only be used as a guide. Mortgage lenders typically present mortgage rates to their customers along with various mortgage offers. However, the interest rate you receive after you close on your mortgage application should be the final rate that determines whether you will be saving money or spending money on your mortgage.
Another one of the most common mortgage mistakes is the use of interest rate locks. Interest rate locks can be extremely confusing and often lead consumers to make irrational decisions. When interest rates are locked in, homeowners must obtain their mortgage application approved before they can begin to research mortgage offers from other lenders. As a result, they miss out on the many different mortgage offers available to them.
The third mistake that homeowners make when refinancing their mortgage is to avoid shopping around. A good mortgage is one that is right for your situation. If you do your homework and shop around for the best rates, you are much more likely to get a good deal on your new mortgage loan.
The fourth mistake that homeowners make when refinancing is the failure to make sure they are taking advantage of all loan offers that are available to them. Even if you find the lowest interest rate, if you do not compare it to other offers, you could be leaving yourself short. It is important that you do comparison shopping among several loan products. You can make sure that you do not miss out on great loan offers by using an online loan calculator.
The last mistake that you make when refinancing is not checking on your credit report ahead of time. By checking your credit score ahead of time, you can detect any errors on your credit report. One of the biggest mistakes people make when refinancing is not checking their credit score ahead of time. You can easily learn more about your mortgage options, including costly mistakes to avoid with a free mortgage tutorial.