Buying a home is one of the largest purchases many people make in their life. It can be a costly and time consuming decision, but it can also be a dream come true for some people. Purchasing a house requires multiple steps. Each step has a different timeline including finding the right house, comparing loans, choosing a bank, and signing the documents. For a new home buyer, it can take even longer since they do not have previous experience handling a mortgage loan. To help speed up the process and prevent any snags, here are some mistakes many home buyers make when getting a mortgage.
Not Knowing Your Credit Score
Your credit score plays a huge part in getting you approved for a mortgage. If your credit report shows too many delinquencies, judgments, high credit usage, and low income then you may not get approved for the loan. Before you even think about applying for a mortgage, you want to first check your credit report and score. Your score is made up of five different categories including length of credit history, new credit, payment history, types of credit in use, and money owed. Your score can range between 300 to 900 depending on your credit history. From time to time, a lender could make a mistake on your credit report causing a mark against you. by checking it often, you can follow up with a lender if you see this happen.
Charging Too Much Before Getting a Mortgage
Another big mistake home buyers will often make is utilizing too much credit before applying for a loan. Lenders want to see that you have a good amount of income without too much debt. This puts you less at a risk to default on your mortgage payments. Generally, you want to keep your debt to income ratio around 40% to 50%. You can figure out your debt to income ratio by dividing all your monthly liabilities by your monthly income.
Not Knowing the True Costs
The sale price of the home is not the only expense you can expect to pay when you get a mortgage. So much goes into owning a home and maintaining a home. When you purchase a home, you also have homeowners insurance, property taxes, and sometimes homeowners association fees. Additionally, should you garage door break, water heater leak, or even your pipes burst, you have these expenses to cover as well. Make sure you talk to your lender about how much you can expect these extra expenses can be.
To learn more, contact a company like I Want A Better Mortgage.