Making a misstep in the process of shopping for and securing a home loan can be costly. Fortunately, many mortgage mistakes, such as those listed below, are easily avoided.
- Not checking your credit. Mistakes on credit reports are not uncommon. Left unaddressed, they can slow the mortgage application process or stop it altogether, potentially costing you that property you want. Financing based on incorrect information can result in a much higher interest rate, so be sure to fix any errors on your credit report well before home hunting or applying for a loan.
- Not shopping around for a lender. While many homeowners stick with their current lender when purchasing their next home, loan structures – rates, terms, fees – may have changed significantly since you last applied for a mortgage; comparison shopping can potentially save you thousands of dollars.
- Choosing a lender based solely on interest rate. Terms and fees (e.g. prepayment penalties) may seem insignificant by comparison, but they can have a much bigger impact on the overall cost of the loan; ignore them and you could end up with a loan structure that doesn't suit your needs, and costs you much more than you bargained for.
- Getting pre-qualified rather than pre-approved. Pre-qualification allows for an estimate of what your bank may lend you; pre-approval is a more formal process resulting in a firmer commitment from your lender. A buyer who's pre-approved is in a stronger position than one who is pre-qualified, and can act more quickly upon finding the right property.