Keep these pitfalls in mind when preparing the mortgage process to save yourself some major headaches!
“Buying a home is one of the biggest decisions you can make, and it’s likely the largest purchase you will ever make. So it’s no surprise that there are multiple ways you can trip up.
Getting a mortgage is about more than having your offer accepted and signing on the dotted line. (Or hundreds of dotted lines, which is what it feels like at the closing table.)
Here, our experts reveal the top seven landmines in the mortgage process and how to avoid them.
1. Neglecting to check your credit before starting the process.
Approaching mortgage lenders without having some idea where your credit lies is like going to an important job interview without checking for spinach in your teeth. “I’m amazed at people who apply for a mortgage and they’re shocked at things on their credit report,” says LearnVest Planning Services certified financial planner™ Ellen Derrick. “They say, ‘I had no idea that I forgot to pay my Best Buy card!’
Mortgage lenders are going to go through your credit report with a fine-toothed comb, and they’re going to make decisions based on how creditworthy you appear to be, including whether to offer you a loan at all … or at what rates. If you don’t check your credit score first, you stand to lose money, or your potential dream home.
What to do instead: Ideally, you’ll check your credit well before you begin hunting for a home, and work to increase your score if you need to, or dispute errors on your report, since those can take time to rectify. You’re entitled to a free credit report from each of the three bureaus (Experian, Equifax and TransUnion) once a year, and you can pull those from AnnualCreditReport.com. If there are errors, fix them. (Some examples: Any accounts listed that aren’t yours, accounts incorrectly listed as being in collections, incorrect large balances reported, or incorrect late payments reported.) The bureaus have 30 to 45 days to investigate the issue and fix it accordingly. Use free resources, like Credit Karma or Credit Sesame, to get an estimate of your credit score for TransUnion and Experian. If you want to see your actual FICO scores for each credit bureau, buy them outright (about $15 to $20 each) instead of committing to unnecessary and expensive monitoring when you sign up for a free trial.
2. Applying for new credit simultaneously.
When you’re applying for a mortgage, your credit is under serious scrutiny. Apply for a new credit card and your credit score will dip temporarily due to the application credit check, which counts as a hard inquiry on your account for about 12 months. The same goes for closing an old account—it will affect the amount of credit you have available, which will negatively affect your score. (Note: For car or home loans, all credit inquiries made within about two weeks of each other count as one inquiry, so when you’re shopping around for mortgage brokers, be sure to submit all of your loan applications around the same time.)
What to do instead: While applying for a mortgage, hold off on opening up a Macy’s store card or applying for a car loan. “You really have to watch where you step in terms of your credit,” says Greg McBride, senior financial analyst at Bankrate.com. “You don’t want to open up any lines of credit and you don’t want to close any out. Just keep doing what you’ve been doing.” And of course, continue making on-time payments and chipping away at any debt.
3. Choosing a mortgage lender without shopping around.
You’ll want to find a mortgage lender early in the process so you have a relationship with him or her when you find the home of your dreams. By doing so, you’ll be able to kickstart the mortgage process by getting pre-approved, which means you can put in a serious offer quickly (should the need arise), and once you sign a contract, applying for the mortgage itself will take less time. To read more about this article click here
Carmen Carr your local real estate agent is willing to help you through your home buying experience. Carmen also can recommend some great local mortgage lenders. Contact Carmen Carr with any questions that you might have. As always… experience Truckee and North Lake Tahoe real estate at a higher level with Carmen Carr, your local real estate expert