When looking for a home loan, there are many things you have to consider because all mortgages are not the same. You will need to exercise caution and consider working with a mortgage broker if you want to get the best possible outcome. There are many mistakes that you can make when applying for your first home loan. Some of them can be incredibly costly. To avoid making these mistakes, consider working with the best mortgage specialists like Tundra Mortgage Brokers. Below are the most common mistakes first-time homeowners and other consumers usually make when applying for a mortgage:
Assuming That a Fixed Rate Mortgage is Better Than an Adjustable-Rate Mortgage
Since the real estate economic meltdown of 2008, most consumers have developed a preference for fixed rate mortgages over adjustable-rate mortgages. After all, FRMs come with fixed monthly payments for the entire duration of a home loan while the monthly payments for an adjustable-rate mortgage may fluctuate from time to time. Well, this could be a big mistake for a number of reasons. For starters, it is worth noting that adjustable-rate mortgages usually come with initial mortgage rates that are significantly lower than fixed rate mortgages. This means that you can save a considerable amount of money over time if things continue as they are. Besides, even if interest rates are raised by the lender, you can always refinance to avoid higher cost. A mortgage broker can demonstrate to you how adjustable-rate mortgages are cheaper in some cases. That is why you need to consult a mortgage broker before making a decision.
Paying a Low-Down Payment
When looking for a home loan, consumers usually consider a number of factors, key among them being the mortgage rate charged and down payment required. Most people assume that the lower the down payment the better the home loan. However, there is a cost that comes with paying a low-down payment. For instance, most mortgage lenders will charge a higher mortgage insurance premium if your down payment does not meet their requirement of 20% or thereabouts. While you may be able to acquire the home of your dreams, you will spend more on mortgage insurance, which can significantly increase the cost of the home loan. A mortgage broker can show you the difference in the mortgage insurance premiums charged by different lenders for borrowers who fail to come up with a down payment that meets their minimum requirements.
Assuming the Top-Ranked Lenders are Always the Best
Mortgages are often defined by their interest rates, down payment requirement, term and processing fees among other things. Just because everybody says a given lender is the best does not make it true. To get the best loan, you will need to compare the terms and conditions offered by different lenders before a decision can be made. A lender may not be ranked as highly as other lenders on major search engines, but they may offer the best home loans, especially to clients like you.
Not Building Your Credit
One major mistake that many people often make is assuming that just because they have saved up for the down payment, and they have the ability to service the home loan, they can get an affordable home loan. This is a big mistake. Lenders usually consider a variety of factors when calculating interest rates, and credit scores are usually considered. Whether you have super prime, prime or subprime credit, the interest rate you get will be affected by your credit rating. A decent mortgage broker can advice you to work with a credit repair agency to build your credit before you apply for your home loan. You may just be a few points away from getting a better credit rating that can earn you a lower rate of interest. In such a case, it would be a good idea to wait for your credit score to reach a decent level before you apply for your home loan.
Rushing to Refinance a Home Loan
The cost of procuring a mortgage is usually quite substantial. Since refinancing a home loan requires the applicant to go through the same process, refinancing can be incredibly costly. For this reason, it is recommended you consult a mortgage broker before you decide to refinance your loan. If your 30-year home loan is less than 10 years old, it would not make much sense to refinance the home loan. However, if you have serviced the loan for over a decade, refinancing may be a good idea. Your broker will help you search for the best home loan refinance company in the city if they think that refinancing is the right option for you. Common reasons for refinancing include to reduce interest rates, to fix an adjustable mortgage rate, to borrow against the equity built in the property and to lower the monthly payments you normally make. Whatever the case, your mortgage broker will provide you with information that can help you make the right decision.
As you can see, these are costly mistakes that first-time homeowners usually make. By consulting a competent mortgage broker, you can avoid all these mistakes.