A Brief Guide to Mortgages in 2018
Becoming a homeowner is exhilarating...and a bit nerve-wracking.
Be prepared by knowing what to expect - so you can make the process as smooth as possible - and end up with a home you love, at a price you can afford.
3 Mistakes to Avoid When Buying a Home
Mistake #1: Not Understanding the Actual Costs of Home Ownership
The sticker price of the house and the monthly mortgage estimates aren’t the only costs of owning a house, and if you don’t factor in all of the expenses, you can easily find yourself getting in over your head.
In addition to the monthly mortgage payment and the closing costs of buying a new house, you also need to factor in homeowner’s insurance, utility bills, property tax and some sort of rainy day fund set aside for emergency repairs.
If you’ve taken a large mortgage that doesn’t leave much wiggle room in your monthly budget, then you may really start feeling the crunch with these other costs.
Quicken Loans offers handy mortgage calculators and cost of living calculators to provide potential homeowners with a clearer picture of what their monthly payments might look like, based on average mortgage interest rates. If you’re still in the initial research phase, this is your best place to start.
Visit Quicken Loans >>
Mistake #2: Going With the First Mortgage
Finding the right mortgage lender is the most important step in the homebuying process. Still, around half of homebuyers in the US don't comparison shop for mortgages. These buyers go to their local bank branch or a lender they are familiar with and get a mortgage quote and feel they are bound to it.
Your first move should be to change how you view the relationship between yourself and the lender. You are the customer and they work for you, not the other way around. The lenders need to compete for your business, and by shopping around, you can find the lender with the best mortgage rates and lowest closing costs. This can save you BIG time.
A good idea is to get at least three different quotes and then use them to comparison shop.
Heading online for a mortgage is slowly being common practice - especially among the younger generation that grew up on the Internet. Mortgage marketplaces - like LendingTree and JG Wentworth - have introduced convenience and automation to the lending process – allowing potential homeowners to apply in minutes, compare rates at a glance, shop around with ease and most importantly, save money.
Visit LendingTree to compare rates >>
Mistake #3: Skipping the Preapproval
What you think you can afford and what the bank is willing to lend you may not match up, (especially if you have poor credit or unstable income). A common mistake made by new homeowners is to start looking at houses before getting pre-approved. The last thing you want is to fall in lust with a home, only to later learn that you can’t afford it.
When you get pre-approved, the lender will tell you how much of a loan you can expect to receive and what type of payments you can expect. It’s not written in stone of course, but it can give you a good idea of what types of houses are in your budget.
Also, once you’ve been pre-approved, you can show that to a potential seller, in order to show them that you are serious and also able to purchase the home. The seller will know that your financing isn’t merely theoretical, and that once you’re ready to sign on the dotted line, you’ve got a lender who will put up the mortgage.
Get pre-approved, and get rid of the uncertainty.
So What Now?
It bears repeating - buying a house is a big decision, and one that should be made wisely. Consider your income, your expenses, and your budget, and start shopping around with lenders to find the best deal for you.
If you want more information on the best lenders in the industry, check out our rundown of the best mortgage companies of 2018.
