For many buyers, getting a mortgage is a must-do step on their path to buying a home. But if you’re not familiar with the process, applying and getting approved for a loan can feel confusing and overwhelming. If you don’t know what you’re doing, you could make a mistake that puts your home purchase in jeopardy.
So what, exactly, are those mistakes, and how do you avoid them?
A recent article from realtor.com outlined common ways home buyers mess up getting a mortgage, including:
- Only speaking with one lender. When you’re buying a home, getting a mortgage with a better interest rate and terms can save you tens of thousands of dollars over the course of your loan. But if you only meet with one lender, there’s no way to know if you’re getting the best deal, or if you could find a lower interest rate elsewhere. That’s why it’s important to shop around for a mortgage and talk to different lenders, so you can compare your loan options, and go with the mortgage that offers the best rate.
- Waiting until you have a 20 percent down payment. For conventional loans, putting down 20 percent as a down payment can help you avoid paying private mortgage insurance (PMI), which adds on an extra monthly fee, which is typically between .3 percent and 1.15 percent of the total loan amount. But if you wait, you could find yourself facing higher interest rates and home prices in the future, ultimately costing you more money than paying for PMI. If you’re ready to buy a home, talk to lenders now and see what your options are, even if you’re not quite ready to put 20 percent down.
- Changing jobs. When you apply for a mortgage, lenders are looking for signs that you can reliably pay back your loan. As such, they’ll generally look for you to have at least two years of consistent income, which means that if you’re considering buying a home, now is not the time to make a major job switch. If at all possible, avoid changing jobs during the home buying process, and wait until after you’ve closed to make any moves in your career.
