There are so many details involved in the process of securing a mortgage, and this is what a mortgage company like City Creek Mortgage is here for. We can help you with everything from mortgage rates to determining the best type of loan for you and your family.
As our expert brokers will tell you, knowing the pitfalls to avoid is just as important as knowing the right buttons to push during this process. What are some of the mistakes to avoid during the mortgage process?
A big mistake many people make is failing to account for the additional costs that will come with home ownership. They’ll budget for their mortgage payments, but won’t leave any left for maintenance and other expected yearly costs.
In general, it’s recommended that you lay out 1 to 2 percent of your budget for expected maintenance. If you get lucky and you never need this one year, that’ just a boon to your end-of-year finances. If you do end up needing it, that’s a worthwhile precaution you took. Also keep in mind property taxes and any special insurance you may need to purchase.
There are lenders who will show you a flashy interest rate figure, but then crush you with huge hidden fees. For this reason, you need to be sure you’re looking at APR costs – these include lender and any other fees, so you’ll see the final, out-the-door price of your mortgage.
No Money Down
It’s typical for lenders to require a 20 percent down payment for most mortgages, and the alternative can be very damaging financially: Mortgage insurance. Mortgage insurance is to protect the lender in case you default on the loan, but you’re the one who has to pay for it if you can’t meet a certain down payment threshold. This can add significant amounts to your monthly payments.
Too Large a Commitment
It’s tempting to make a big investment in a mortgage, which is often your life’s largest expense. This is a legitimate aspiration, but be sure not to take it too far. Spending too much on a mortgage can take away from other vital areas like a car, retirement planning or college education for the kids.
The general rule is this: Don’t spent more than 28 percent of your yearly pretax income on your living situation, including your mortgage. If your costs will well exceed this number, consider whether a smaller mortgage might be the better route.
Credit score goes a long way to determining the types of loans and interest rates you’ll be approved for, and it’s a mistake to go searching for a mortgage without proper credit management already in place. Try to check at least six months in advance, so you’ll have time to move some things financially and raise the credit score if it’s too low.
Our brokers at City Creek Mortgage are here to answer any further questions you have on this or any part of our mortgage services.