Applying for a mortgage can be stressful, especially if it's your first time. It's common for people to make mistakes in the mortgage application process, and sometimes those mistakes can have long-lasting effects. If you're thinking about buying a Belle Meade home, here's what you need to know to avoid serious mistakes.
1. Borrowing Too Much
Most lenders will approve borrowers up to a certain amount. Sometimes, the maximum amount that a lender will approve is more than the borrower can realistically afford while maintaining their preferred lifestyle. Buying a home that is too expensive could result in the borrower being house poor, meaning that the home buyer must spend a large portion of their monthly income on their own mortgage.
Being house poor can make life stressful and challenging. Home buyers who are house poor often find themselves unable to do things they enjoy, like taking vacations or going to the movies. Spending too much each month on a mortgage leaves little money for other more enjoyable activities.
2. Failing to Shop Around
Different lenders will offer different loan packages and interest rates. Shopping around enables the home buyer to find the right mortgage package. Failure to shop around could needlessly cost the home buyer extra money in interest, resulting in less disposable income every month and poorer quality of life.
3. Failing to Budget for Home Maintenance
Generally speaking, most homeowners must spend approximately 1% of their home's value on maintenance. Failure to perform maintenance or make appealing home improvements could result in serious damage to the house and a reduction in property value.
Home buyers who are trying to decide how big their mortgage should be must remember this rule and take it into account. If the home they purchase is too expensive, the home buyer could find making home improvements very difficult.
4. Making a Major Purchase
After making an offer on a home, before the mortgage is approved, the buyer enters into the escrow period. Making a major purchase (like buying a car) during the escrow period could be a big mistake. Big purchases can have an impact on a person's credit report, if they take out a loan to make the purchase.
A big purchase can also have an impact on a home buyer's debt-to-income ratio. Too many changes can cause a buyer to be turned down for the loan they need to buy the house they want.
Home buyers are encouraged to wait until after they've bought a home to make a major purchase, especially if that purchase will have an impact on their credit report or debt-to-income ratio.
5. Failing to Fix Your Credit Report
It's not uncommon for errors to appear on credit reports. A home buyer's credit report is one of the major factors that lenders take into consideration when trying to decide whether they should loan a home buyer money. A serious error on a credit report could stop a home buyer from getting the loan they want, which could prevent them from getting the home they want.
Errors are easy to catch on a credit report. Home buyers who want to start talking to lenders about borrowing a mortgage should first find out whether their credit report is accurate. People are entitled to one free credit report per year from each of the three credit bureaus. To find out if your credit report is accurate, get a copy of your report and work with the credit bureaus to get your credit report corrected.
Contact a Lender to Get Started Today
If you're thinking about buying a home soon, contact a lender. Speaking with lenders can help you understand the process. The more informed you are, the better decisions you'll make during the home buying experience. Contact a lender today to get started.