Avoid These Two Big Home Mortgage Mistakes
We all know that searching for and viewing potential homes is the fun part of the home-buying process. The not-so-fun part? The home mortgage process.
However, if you don’t pay attention to the details, your mortgage can end up dragging down the enjoyment of your new home and cause some major regrets. Here are a few mistakes to avoid to ensure that you love your home mortgage terms as much as your new home.
Don’t Find Your Home First:
Shopping around for the best mortgage should be the first step in the home buying process. You may even want to talk to a lender a full year before you plan to buy. It’ll give you time to get your affairs in order to qualify for the best rate, could save you thousands of dollars in the long run, and you won’t feel rushed to accept an unattractive loan because you’re worried you’ll miss out on your dream home.
Buyers should also know that you generally can’t submit an offer without evidence of ability to finance. Prioritizing the home mortgage can allow you to act quicker when you do find the home of your dreams.
Don’t Forget Your Real Budget:
There’s often a big difference between what a lender says you can afford and what you can actually afford. Your debt-to-income ratio doesn’t include the money you spend on daycare and college tuition, savings for retirement, the cost of commuting to work, or maintenance and utility costs. Really sit down and examine your spending before committing to the loan amount the lender is offering. You won’t enjoy your home nearly as much if you end up being “house poor” and eating bologna sandwiches for lunch every day.
If you are unfamiliar with creating a household budget, here is a link to a template that you can download. Remember to look over your spending over the last few months to make sure you are reflecting your actual expense levels. You can also use tools like mint.com and Quicken software to make it easier to track your spending going forward. Based on your budget, you may decide to lower the amount you had planned to spend on your home.
The lender can also educate you on other costs of buying your home that you may not have anticipated. For instance, you will need a down payment and closing costs (including the escrow needed for property taxes and insurance). Use the months before you purchase to make sure you are financially prepared to buy your new home.