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July 10th, 2017 by

Mortgage Mistakes to Avoid
Buying a house is a major decision. Your first real estate purchase will be the biggest investment you've ever made, and it will stick with you for years to come, in the form of principal payments, interest charges, and other fees. That is s why it's so important to slip out of your wide-eyed newbie mode, and develop some strategies and skills that have served countless home buyers before you. Instead of buying a house blindly, make sure you are aware of these common mortgage mistakes, and how you can avoid falling into the same pricey trap.

  1. Only applying for a mortgage with one lender.
    Comparison-shopping is important when you're buying a house, and it starts at the very first step: the loan application. You need mortgage pre-approval to compete in the housing market, and if you get it from the right company, you could save a small fortune in fees and interest charges. Make the most of your real estate investment by preventing unnecessary expenses. Apply for loans with several different lenders, and compare their disclosure forms and fees to see how much you will really end up paying.

  2. Leaving your credit score alone.
    Your credit score plays a huge role in the final price you pay for a new home. That three-digit number could make a six-digit difference in interest rates and fees, but first it determines whether you're accepted for a loan in the first place. Fortunately, you're not helpless to improve your score. Monitor your score regularly and examine reports for possible errors, like debts that don't belong to you or bills you paid long ago. And at least six months before you start applying for mortgages, start making lifestyle changes that will raise your rating. Make extra payments on loans with big balances, and when you use your credit cards, make sure you're not using more than 20 percent of your total limit in any given cycle. And don't apply for any new credit within a six-month window of applying for the mortgage.

  3. Spending too much on your house.
    Your final mortgage payment, including home insurance and property taxes, should represent less than 28 percent of your monthly pretax income. If you agree to a mortgage that will make up more than a third of your monthly expenses, it's a recipe for disaster. Remember: unexpected expenses are almost a guarantee when you're a homeowner, and you'll also need money to furnish your home, put into savings, and maintain your vehicle and other life expenses. No one wants to be "house-poor", so don't commit to a mortgage that won't leave room for any extra costs in your budget.

  4. Failing to account for personal expenses.
    Before you calculate the maximum mortgage payment you can afford, inflate your budget even more. You might think your mortgage follows the one-third rule, but if you haven't tracked your monthly expenses and left room for your actual lifestyle, you might be in for an unpleasant surprise. For example, do you have pets? How much does it cost to feed and care for them every month? What about gym memberships, morning coffee, or happy hour rounds? If you want to maintain the same interests and hobbies you already enjoy, make sure your budget includes them too.

Do you need help buying a house in northwest Indiana or southwest Michigan? Contact Cressy & Everett Real Estate today to find a representative who can help you navigate this exciting process. Our real estate agents have years of experience helping first-time buyers make smart investments in homes that truly make them happy.

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Categories: Buying a Home
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