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Home buyers can make mistakes that could put their mortgage in jeopardy leading up to closing or make them miss out altogether in homeownership.
“Most buyers are so preoccupied with simply saving up for a down payment and getting their foot in the door that they forget about the little details that can trip [them] up,” Michele Harrington, COO of First Team Real Estate, told The Mortgage Reports.
Real estate pros and financial experts point to several of the most common mistakes buyers make, such as financing a car or another expensive item before closing. They may buy new furniture and appliances for their new home on credit. “All of these activities are a big no-no, as lenders will do a final credit inquiry check before closing,” Jim Roberts, president of True North Mortgage, told The Mortgage Reports. “If new debts were added, it could jeopardize the loan approval.”
Also, borrowers may be tempted to max out their credit cards as they try to afford homeownership by saving money. Lenders consider how much you owe relative to your credit limit. For example, if a borrower owes $2,000 on a limit of $2,500, the card is considered nearly maxed out, which will significantly reduce a credit score, Roberts said.
Another big mistake that home buyers often make: failing to shop around for their mortgage. “Although many lenders’ rates are very close in price to others, some lenders charge rates that are above average,” Kahri Washington, broker and owner of 1st United Realty & Mortgage, told The Mortgage Reports. “Getting a bad loan with a higher interest rate can be very expensive in the long run, so be sure to shop around and get quotes in writing from several different mortgage lenders.”
A 2018 study by Freddie Mac found that potential borrowers could save an average of $1,500 over the life of a 30-year fixed-rate loan by getting just one additional rate quote when shopping for a mortgage. More quotes can offer more savings; for example, 80% of borrowers who received one additional rate quote while shopping for a mortgage saved between $966 to $2,086 over the life of their loan. Eighty percent of the borrowers who obtained five quotes saved between $2,089 and $3,904, according to Freddie Mac’s report.