10 Common Home Loan Mistakes

Purchasing a house is likely to be the most significant investment you will ever make. Your home loan will probably be your largest household expense and the most significant financial commitment you will make in your lifetime. Each day, many people like you have their home loan applications rejected due to a range of errors. By becoming familiar with the ten common mistakes people make when applying for a home loan, you can save thousands of dollars.

To avoid disappointment and save thousands of dollars, read on.

1. Avoid using an interest-only or payment option adjustable rate loan to qualify for a home that you cannot usually afford. These loans may be useful in some situations, but caution should be exercised in the current housing market with slower appreciation and falling prices in certain areas. You may end up with a mortgage value that is higher than the home's value.

2. Do not co-sign on someone else's loan unless you are willing to assume that liability and forego getting your home.

3. Late payments, particularly within the last year, can make it challenging to qualify for the best terms and rates. Always make payments on time.

4. Disclose all relevant information to your mortgage broker, even if it may be embarrassing to discuss previous financial difficulties.

5. Do not overuse credit cards, as this may make it harder to get the best loan rates and terms if balances are not kept low or paid off. Discuss any new debt with your mortgage broker before taking it on.

6. Wait until after purchasing your home before making major purchases as it is better to determine outstanding debt before applying for a mortgage.

7. Do not choose a lender solely based on the lowest rate. Keep in mind the APR and origination fees and accessibility of the lender.

8. Get pre-approved for a loan to become a cash buyer and have more negotiating power with the seller. Any reputable Realtor will require pre-approval before showing homes.

9. Plan for closing costs, including attorneys' fees, taxes, title insurance, prepaid homeowners insurance, points, and other lenders' fees. Closing costs can range from 2% to 7% of the home's selling price.

10. Provide all necessary documents to your mortgage company promptly to avoid expiring locks, higher rates, or delayed or blown closing dates.

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