Ten Mistakes and How They Can Affect Your Mortgage

Wouldn't it be great if everything in life came with a checklist?  Unfortunately, for most of us we have to learn life's lessons the hard way - by experiencing them!  Fortunately, for home buyers there are some rules of the game that are well known and can help you avoid major pitfalls when buying a home or refinancing your mortgage.  Let's take a look at ten mistakes that can have detrimental affect on your mortgage so you can prepare yourself now to get the best terms possible on your next mortgage.

#1 - Not shopping around.  Too many people go to their local bank or other financial institution for their mortgage and never shop around.  As a result, they end up paying more over the life of the loan because they don't realize what they could have had.  Go to at least three mortgage providers when looking for a loan - make them compete and earn your business!

#2 - Using the mortgage broker the realtor recommends.   Sure the realtor is the sweetest person you ever met and tells you not to worry because her friend over at ABC Mortgage will take care of you - what she isn't telling you is that she is getting a kickback for recommending them.  Realtors have one goal in mind - to earn commission on the sale.  You can often get much better deals by shopping around yourself and saying "no thanks" to the recommendation.

#3 - Buying too much house.  How many square feet do you need and how much can you afford?  Don't get yourself into a situation where you have too much house that you can't afford over your lifetime.  Remember, it's not just the monthly payments you have to worry about.  You also need to think about property taxes, insurance and heating and cooling costs.

#4 - Getting into the wrong mortgage.  A quick scan of the newspapers will show you that a lot of people have gotten into the wrong mortgage.  Make sure you know the differences between fixed and adjustable rate mortgages and seek the help of a trusted, third party to help you make the right decision.   Be sure to review the prepayment penalties as well - why should you be penalized for paying off your loan ahead of time?

#5 - Credit.  This one you probably already know about, but it is worth repeating again and again.  Clean up your credit and don't make any big purchases right before you go to take out a mortgage.  Save the new car purchase or flat-screen TV purchase until after you have signed the loan paperwork!

#6 - Borrowing too much.  This goes hand in hand with #3.  Don't anticipate future earnings and buy a house you simply cannot afford.  Purchase a house you can afford now, even if it may not be your dream house.  In a few years, if you are earning more, you can look into buying a bigger house.  Start small and work your way up so that you know you can afford your mortgage and not get yourself into financial trouble down the road.

#7 - Missing out on programs for first time home owners.  Many first time homeowners don't take advantage of the various programs and discounts available for them.  Check into local, state and federal programs that can help reduce your interest rate and potentially negotiate better terms.

#8 - Inaccurate information, or garbage in/garbage out!  Don't try and fool the lender - it isn't worth it.  Make sure you have supporting documentation for everything you put down on the mortgage application.  Furthermore, never sign a mortgage document in which the lender hasn't completely filled out all the fields.  Insist on honesty on both sides of the desk!

#9 - Not locking in the rate.  Rates can change in the blink of an eye.  Get your rate locked in and don't wait around until the last moment.   Get your rate in writing with the complete terms spelled out from your mortgage lender when you lock it in.

# 10 - Not considering the other "charges" in your mortgage.  Sure, you got a great rate on your mortgage, but did you carefully read about the other charges the lender has stuck in?  Rates are important, but make sure you understand the full cost of your loan.  Read (and question) all the charges listed.  Sure, you might have to pay a quarter of a percent more by going somewhere else, but after you add up all the fees you may find that by going to a lender with a slightly higher rate can actually save you money.