It is quite strange to see people spending more time looking for the best option when buying a car and not putting in as much effort when getting a loan to buy a home. Without a doubt, a home is the most expensive purchase you will make in your life. It is therefore important to ensure you do not make common mistakes that land you in serious trouble.
The unfamiliarity and enormity of getting a mortgage can certainly scare you, but researching your options and taking an informed decision can help you cut a perfect deal. Here are a few things you should not do when taking a mortgage or it will turn out to be the biggest mistake of your life.
Do Not Make Yourself House-Poor
Becoming house poor means that you have committed too much money to housing-related costs and that now you have nothing available for anything else. You will not have any money to save for retirement, replace your old car, build a college fund for your kids, and even buy furniture for your new home. Not deciding how much monthly income should go to cover housing-related costs is a serious yet common mistake. Ideally, you should spend less than 28% of your income on housing. Be sure to use a UK mortgage calculator to know how much mortgage you can afford easily.
Do Not Ignore or Misunderstand Mortgage Rates and Discounts
It is a mistake to base your decision only on the availability of discount points. The decision may work when you know you will be staying in your home for long enough. You should pay more attention to the original mortgage rates, but know that they change throughout the day. Monitoring those rates carefully is the key here. Also, bear in mind that not all mortgage deals with a low rate will work in your favor. Sometimes, a lender may leave you out of pocket by surprising you with different kinds of fees you have to pay after accepting a deal. So, consider interest rates, discounts, and hidden fees before signing the dotted line.
Do Not Forget to Compare Lenders
People often make the mistake of not shopping around and comparing lenders. Understand that lender fees are quite negotiable and vary greatly from lender to lender. Not reaching out to several lenders to compare their fees and rates is a big mistake. This seemingly time-consuming task can save you from paying hundreds of dollars. A good option is to use Habito, the largest online mortgage broker in the UK, where they use a powerful algorithm to compare 20,000 mortgage deals to find what suits you the most.
Do Not Ignore Your Credit Report
Ignore it and your mistake will haunt you later. You might have to pay hundreds of dollars extra if your credit report shows a recent late payment or default. Lenders will consider your credit report and affordability ratio to decide if they should offer a loan or not. Ensure your credit report presents you as a good candidate before you are open to mortgage affordability assessment.
Do Not Miss the Chance to get a VA Loan
You may not always qualify for a VA or Veteran’s Administration loan, but when you do, ensure that you take advantage of this option. You are qualified if you have served in the Armed Forces. The benefits of VA loans include relaxed qualification requirements, protection from the government, reduced interest rates, and more.