Mistakes to Avoid When Securing a Loan

• Mistake: Waiting until you’ve found a home you want before getting pre-approved for a mortgage can delay your search and put you at a disadvantage.
• Why to Avoid: Sellers are more likely to take your offer seriously if you’ve been pre-approved, as it shows you’re financially capable of completing the transaction. It also helps you set a realistic budget and avoid wasting time on homes you can’t afford.
• Tip: Start the pre-approval process early to determine your price range and strengthen your negotiating position.

• Mistake: Failing to check your credit score before applying for a mortgage can lead to surprises, such as being offered a higher interest rate or even being denied a loan.
• Why to Avoid: A low credit score can affect your loan approval and the interest rate you receive, which can add up to thousands of dollars over the life of your loan.
• Tip: Check your credit report well in advance, and take steps to improve your score (e.g., paying down credit card debt) if needed before applying for a mortgage.

• Mistake: Buying a new car, furniture, or making large purchases before closing can increase your debt-to-income ratio (DTI) and reduce your ability to get approved for the mortgage or affect the terms of the loan.
• Why to Avoid: Lenders assess your DTI to determine how much of your income is going toward existing debts. Big purchases increase your debt, which can make you look like a higher risk to lenders.
• Tip: Avoid any major purchases or opening new credit accounts between the time you get pre-approved and closing on your home.

• Mistake: Accepting the first mortgage offer you receive without comparing rates and terms from multiple lenders.
• Why to Avoid: Even a small difference in interest rates can make a big impact on your monthly payment and the total amount you’ll pay over the life of the loan.
• Tip: Compare mortgage rates and terms from at least three lenders to find the best deal. Pay attention to both the interest rate and the associated fees.

• Mistake: Focusing solely on the down payment and overlooking other costs like closing costs, which can add up to 3-6% of the home’s purchase price.
• Why to Avoid: Failing to budget for closing costs can leave you unprepared for the final step of the home-buying process, potentially delaying your purchase or forcing you to scramble for additional funds.
• Tip: Ask your lender for a good-faith estimate of closing costs early in the process so you can plan accordingly. Look for opportunities to negotiate closing costs or ask the seller to cover some expenses.

• Mistake: Focusing only on the monthly payment without understanding the full cost of the mortgage over time.
• Why to Avoid: While a low monthly payment might seem affordable, it could come with a longer loan term, a higher interest rate, or other factors that make the loan more expensive in the long run.
• Tip: Consider the total cost of the loan over its lifetime, including interest, and think about how the loan fits into your overall long-term financial plan. Use online calculators to estimate the total cost of different loan options.

• Mistake: Focusing only on the mortgage payment and forgetting about other ongoing expenses, such as property taxes, homeowners insurance, utilities, maintenance, and potential HOA fees.
• Why to Avoid: These additional costs can add up quickly and significantly affect your monthly budget, potentially leaving you financially strained if you’re not prepared.
• Tip: Create a detailed budget that includes all the costs of homeownership. Consult with your real estate agent or lender to estimate property taxes, insurance premiums, and other recurring expenses.

Securing financing for a home purchase is a critical step that requires careful attention to detail. By avoiding these common mistakes, you can improve your chances of getting the best possible loan terms and successfully closing on your dream home. Remember to stay informed, work closely with your lender, and always plan for both the expected and unexpected costs of homeownership.