We’re not at the average age of first time home buyers yet, but when we are ready in a few years, we know that there is so much to consider: double-checking a mortgage calculator to know exactly how much you can afford; going with the lender that offers the best interest rate; knowing which size house is best for your family and many other factors. With so much at stake, you may find yourself caught up in the excitement of making that first home purchase and this is when mistakes can be made.
Avoid job hopping prior to seeking a mortgage lender. Lenders like to see that you can prove stable income every month for any given length of time and going from one job to another only proves that your job history is shaky at best. Transferring to the same job in a new location isn’t a deal breaker, but completely switching careers can cause problems. The best thing you can do is to wait until after the closing date to change jobs.
Many potential homeowners skip the step of becoming pre-approved for their loans. Don’t jump into house shopping thinking you can afford a certain amount because there’s always a chance that you won’t be approved.
Getting a pre-approval is more involved than a pre-qualification because the lender will look at your credit history, employment status, current assets and total income to get an idea of what you can really afford. This is why using a mortgage calculator is so important before shopping around for a home, but be sure to use the mortgage calculator in conjunction with an authentic pre-approval.
It’s also smart to check your credit score long before the bank does so you know exactly where your credit history stands. This way you can clear up any discrepancies, if they exist and polish that report until it shines. Stay away from applying for other types of credit such as credit cards when seeking a mortgage, since doing so can harm your credit score.
A major mistake that most first-time homebuyers make is not shopping around for their mortgage. Just because you’ve banked with a certain financial institution for years doesn’t mean you have to take out a mortgage with them and just because you’re pre-approved with one doesn’t mean that you have to go with them. Compare multiple banks and home loan lenders to see which one offers the best rates and loan terms.
Finally, the biggest mistake that homebuyers make is not reviewing those loan documents. It’s easy to just sign on the lines pointed out by your loan officer and considering the stack of papers involved in a mortgage document it’s no wonder that people skip this step, but going over the mortgage in its entirety is crucial. You are consenting to take responsibility for that mortgage, so you need to know exactly what terms you are accepting. If there is anything listed that you don’t agree with, bring it up with the loan officer and never be afraid to ask questions.