4 Rookie Mistakes to Avoid When Applying for a Mortgage Loan

A home mortgage is the biggest loan most people will take in their lifetime. Avoid these common mistakes that can cause you to pay more than you should.

1. Not being aware of and fixing credit report problems

Examine your credit reports. Fix errors and credit problems than can lead to high mortgage rates or loan rejection.

2. Not paying enough or any down payment

Lenders typically require a 20% down payment in order for you to receive their best rates.

Mortgage insurance can add 0.20% to 1.50% of your outstanding loan balance to your mortgage payments. The buyer pays premiums, but the insurance protects the lender, not the borrower, in case you are met with circumstances that cause mortgage default.

3. Not setting a realistic limit to avoid becoming house-poor

Overextending yourself by agreeing to use too much of your income to loan payments and other house-related costs can leave you with too little funds for everything else.

It’s very common for people to over-borrow and find themselves very regrettably living long-term in financial circumstances that prevent them from saving money for retirement, for kids’ college education, or even to replace old cars or broken household items.

The most basic rule for determining how much you can really afford to spend for housing is to agree to no higher amount than 28% of your pretax income (including mortgage, and all monthly home ownership costs.

4. Not being aware of the actual cost of homeownership

Owning a home comes with multiple additional expenses that often catch first-time buyers unaware until the costs start to add up.

Budget 1-2% of the purchase price of your house for routine maintenance (HVAC, minor plumbing and electrical, water heater, etc.). Expect to spend more on an older and/or larger home.

For More Information

For more information about preparing to obtain a mortgage loan, or to discuss applying for a mortgage, contact Midland Mortgage to speak to a friendly, knowledgeable home mortgage expert. We’re here to answer all of your questions anytime. Our professional team has been helping our neighbors with the best home mortgage options in South Carolina.

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