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Thinking About Buying a Home? Avoid These Home Loan Mistakes

Loan approval these days is a must BEFORE buyers begin their home search, but don’t jump in until you read this article.

It’s Springtime! Historically, this is when the real estate market begins to jump into action. As Summer nears, many buyers want to have their home choice secure so that it’s easier to move the family in between school sessions. Tax season is also a big motivator for some: Either because they received a sizable refund that will help with home purchase and moving expenses, or because the lack of a refund has motivated you to consider the tax benefits of home ownership.

That being said, it’s important

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to understand the basic tenet of today’s real estate market: Without loan prequalification (or better yet, preapproval), you’ll be hard pressed to present an offer for your dream home to the seller, or even get in the front door.

Competition is still pretty stiff, despite a rise in available homes for sale. Many buyers are clamoring for a scarcity of properties, so putting your best foot forward in an attempt to “win” your bid is paramount to your success. However, there are many mistakes buyers make when obtaining a home loan that can cost them plenty, or frustrate them to the point of walking away. Here are some things to consider:

Do Not Make These Home Loan Mistakes

Buyers don’t shop for the best rate and fees.

This is one of the biggest mistakes home buyers make. While mortgage rates are set by economic market conditions, this doesn’t necessarily mean that your lender will give you a loan at today’s posted rate of 4.46%. Your credit score and debt-to-income ratio are the main factors playing into your loan rate, and in some cases, there’s very little you can do about it except to “buy down” the rate as part of your closing cost fees.

Speaking of closing costs and loan fees, make sure you shop around. Lender fees vary, and in many cases, you can negotiate a better deal. One thing is certain though; the higher your credit score, the better position you’re in to negotiate.

Buyers don’t bother to read the fine print.

Rates and fees aren’t the only things that can vary in a home mortgage. Terms and conditions with regard to how your loan is paid can vary as well. Some loans come with prepayment penalties, others may add excessive or “junk” fees, adding to the cost of your loan. Make sure you’re paying complete attention to the details, and don’t hesitate to ask questions BEFORE you sign your loan documents.

Buyers look at the short term, rather than the long term, when choosing a loan.

While interest rates are incredibly low, some loans offer even lower rates based on certain conditions. Buyers who see the opportunity to “go in cheap” by obtaining an Adjustable Rate Mortgage (ARM) may find themselves in a financial pickle once the loan resets. Other low cost loans may come with an exorbitant balloon payment when they end their term. No money down loans are a great way to use leverage, but be advised that you most likely will pay Private Mortgage Insurance (PMI) on top of your loan payment every month. Again, ask ALL of your questions before you sign those loan docs.

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