5 Mortgage Mistakes You Can't Afford
Whether you’re buying your first home or your fifth, mortgage mistakes can become serious financial disasters with long-lasting consequences. Most people commit home loan mistakes by failing to properly prepare and have all their paperwork in order. However, even if prospective homebuyers prepare properly, have all their documentation together, and make a sober assessment of how much home they can comfortably afford, they can still fall victim to a mortgage mistake that will haunt them for a long time. Here are 5 common mortgage mistakes that you simply cannot afford to make:
Choosing the wrong mortgage
There are many different factors included in this type of mortgage mistake. You could choose a mortgage with an interest rate that’s too high or a variable interest rate. You could choose a mortgage that is too short, which results in higher monthly payments than you can afford. On the other hand, you could choose a mortgage with a large balloon payment a few years down the road that could result in the loss of your investment if you don’t have the funds to cover the payment. The first step in finding the right mortgage for you is choosing the right mortgage lender, so get off to a good start.
Outstanding credit
Large credit balances on an application represent a red flag to potential lenders. Even with no late payments, a few balances spread out over a handful of retailers or credit card companies enhance your risk of mortgage default in a lender’s eyes.
Lie on your loan application
This is a HUGE mortgage mistake. Lying on a mortgage application is against the law. The majority of lenders are very thorough in checking out the creditworthiness of applicants and a lie is very likely to be sniffed out. Not only will your application be turned down, there’s a good possibility you’ll be contacted by law enforcement officials.
Skip a home inspection
Skipping a home inspection to save a few bucks could cost you a bundle. Always have a home inspected completed before signing any documents.
Hide if you can’t make your payments
If you’re unable to make a mortgage payment, one of the very worst mortgage mistakes you can make is hiding from the lender by not returning phone calls or correspondence. This severely limits your options to rectify the situation. If you’re going to be late for any reason, be honest and forthright with the lender and they will work with you.
Lenders are usually very astute at determining which home loan mistakes are honest mistakes and which mortgage mistakes are deliberate attempts to game the system. If you make an honest mortgage mistake, talk to your lender right away and they will help you find the best way to resolve it. However, if a lender has reason to believe that a mortgage mistake is not a mistake at all, they will contact the authorities and you will have some explaining to do.