Buying a home or refinancing one is perhaps the largest financial transaction you will ever make in your life, so you want to be sure to avoid any mistakes that may cost you in the long run. When you are deciding on a mortgage, you certainly don’t want to make your decision by flipping a coin.
You will have to do as much research as you possibly can, so that you will understand all of the jargon the people in the mortgage industry will throw at you.
Here are three common mistakes that people make when deciding on a mortgage.
1. Settling for a high interest rate.
When you are shopping around for a mortgage, one of the most important factors is the interest rate. The interest rate will ultimately decide how much money you will be spending at the closing table and how much you will be spending in charges over the life of the loan.
The difference between a percentage and half a percentage could mean thousands of dollars over the life of the loan.
So shop around, if you speak with four different loan officers, I can assure you, you will get four different rates, obviously you want to go with the one that is the lowest.
Don’t be afraid to ask questions. Ask how the rate is determined. Sometimes loan officers can make a little extra commission by raising the rate a little bit.
2. Read your good faith estimate
When you decide on a mortgage and a lender, they will send you disclosure documents, they are required to send these by law. Inside of these documents you will find a good faith estimate. This is an accurate estimate of what you can expect your closing costs to be when you go to settlement.
Read every part of this document line for line and word for word. If there is anything on there that you don’t understand, call your loan officer and go over it together.
Your loan officer will most likely want to mail you these documents. This is fine. However, if you can meet somewhere to go over it together, than all the better.
But read your good faith estimate very carefully before you sign it, this could save you anywhere from a couple of hundred dollars to a couple of thousand.
3. Don’t be afraid to shop around
If at any time a lender or loan officer tells you not to deal with anyone else because it may be detrimental to the loan or to your credit, they are lying. If this happens, they are trying to scare you out of doing business with anyone else.
Feel free to shop around as much as you would like. Do as much research as you can before making a decision. So when you finally do make a decision on a mortgage, you can avoid the pitfalls that people so often make.
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