7 Mistakes Buyers Make When Shopping for a Mortgage

Choosing a Lender for Mortgage The purchase of a home is likely to be the largest single purchase that most Americans make these days. In order to start off on good financial footing, as well as remain that way, it's important to avoid some common financial pitfalls that can besiege many potential homeowners. 

1. Not Shopping Around

Consumers tend to do a great deal of research when it comes to items such as purchasing the latest electronic gadgets, finding a place to eat dinner and the ratings of the movies they want to see. For many new homeowners, though, that same careful shopping around and comparison isn't extended to their mortgage. According to study results compiled by the Consumer Financial Protection Bureau (CFPB), almost half of the people who finance their mortgages don't shop around before deciding on a financial institution to get their mortgage. 

2. Not Looking at the Big Picture

When searching for a home, it's easy to become focused solely on the seller's asking price of the home. After all, the typical homeowner has a budget for their mortgage that they need to stay within. While the selling -- as well as the eventual purchase -- price is a good place to start when shopping for a mortgage, there are other expenses that need to be taken into consideration as well.

These may include the total cost of the loan, closing costs, whether the mortgage's interest is variable or fixed, the cost of private mortgage insurance, if required, and other factors. 

3. Relying Solely on Advice From Others

It makes sense to many people who are looking for mortgages to ask experts like a mortgage broker, real estate agent or loan officer for advice when they have questions. While these professionals are solid sources of information and are generally trustworthy, it's worth noting they are not completely unbiased when providing services associated with the home purchase.

Friends and family members -- though they are well-meaning -- are not always good sources of information. This is because what works for one person's situation might not be the right choice for another's.

In addition to gathering advice and information from the above sources, it pays to also explore unbiased sources of information such as reputable finance websites, financial planners and housing counselors. 

4. Choosing a Mortgage Lender for the Wrong Reasons

According to the CFPB study noted above, many potential homeowners choose a lender based on factors that aren't relevant to their particular needs when it comes to a mortgage. For example, some borrowers choose a lender simply because there is an office near their home or on their commuting route to work. Other people head to the financial institution with whom they already have an established relationship. A third common factor is the financial institution's reputation within the area.

While all three of these factors might be a good place to start, they are not necessarily the best place to obtain the best rates or mortgage loan package. For example, one lender might offer a borrower a loan product with a slightly better interest rate but it could come with a different set of costs. This could raise the total costs of the loan as well as the borrower's monthly payment. 

5. Being Unknowledgeable About the Mortgage Process

It's understandable: the mortgage process is complex and can be downright confusing to most people who are in the market for a home. While it's easy to focus solely on the amenities that a buyer wants in their home, as well as the purchase price and the interest rate, it is in a borrower's best interest to have a general idea of the entire process.

The ideal mortgage officer will take the time to provide the borrowers with an outline that details the process in a clear, step-by-step manner. A checklist of steps that the borrower can use to follow along as the home buying process unfurls is a helpful format as well. 

6. Signing Without Reading Documents

Mortgages are complex agreements that attache a home buyer to a loan vehicle for many years. It can be overwhelming to keep track of the process from start to finish. By the time homeowners reach the last phase where they sign their documents, many of them are simply so tired of the process -- as well as eager to take possession of their new home -- that they just sign on the dotted line and grab the keys.

This is a mistake since, very often, the loan officer might be only giving borrowers the highlights of the loan package. Missing important information such as a timetable for an increase in interest rates or the due date of a balloon payment, can wreak havoc on the finances of even the most well-prepared borrower. Instead, it's important for borrowers to allow themselves time to read over their loan documents before signing. 

7. Not Allowing Plenty of Time

The home buying process is one that should be undertaken within a generous time frame for best results. If a consumer knows they will be in the market for a new home, they can begin making preparations months in advance. Searching for a lender, for example, is best accomplished in a systemic way that lays out the various options that are available. Leaving a generous time frame also allows the borrower time to gather the necessary documentation so they can be adequately prepared when they arrive at the loan office. 

Being suitably prepared financially puts consumers on a more stable foundation when it comes to making the largest purchase in their lives. Being aware of the above seven common financial mistakes can help make the mortgage process easier. 

Dylan Snyder is a seasoned real estate professional serving the Jupiter real estate market, Palm Beach real estate market, Palm Beach Gardens real estate market, North Palm Beach real estate market, and the surrouding Palm Beach County area. Along with being a top producer in Jupiter real estate, Dylan's professionalism and expertise in luxury and waterfront real estate sets him and his team of real estate experts apart from the competition. For more information on Jupiter and Palm Beach real estate for sale, contact Dylan at (561) 951-9301.

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