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Top Home Buyer Mortgage Mistakes

Home with Sold sign in front yard

They get “Pre-Qualified”, instead of “Pre-Approved”

Most homeowners will need a mortgage and wrongly assume that getting “pre-qualified” is the first step to making an offer on a home. But what’s the difference?

Pre-Qualification is simply your bank’s estimate of the mortgage amount you may be able to handle and is based entirely on the information you have provided them. It carries no weight with sellers, and doesn’t mean that you will be approved for this amount.

Pre-Approval requires your bank / lender to review your income and bank statements, your credit report, and other financials. After completing their review, and based on that information, your bank will approve a maximum mortgage amount. With pre-approval, unlike pre-qualification, you will be able to make an immediate offer on a home.

They cheap out on the inspection

It is important to keep in mind that houses don’t come with warranties, and can have hidden electrical, structural, plumbing, Asbestos, Mold, Radon, and other issues. For this reason, a thorough inspection by a qualified Home Inspector is incredibly important to protect your investment. When choosing a home inspector, look for one that is comfortable with and happy to address your questions and concerns, and who has a good reputation in the area. Keep in mind that the inspection process happens after the sellers have accepted your offer, and is meant to provide you an opportunity to discover issues that may result in expensive repairs later. Often, rather than risk the sale falling through, the seller may agree to pay to have some of the issues found in your home inspection rectified for you.

They don’t research the best mortgage for them

Mortgage options are diverse and specialized to the unique needs of the applicant. For this reason, it is strongly recommended to research which mortgage option best suits your needs, so that you can pick the best one for you.

PMI or Private Mortgage Insurance protects the lender in the event that you default on your loan, and comes with a monthly premium cost that is passed on to you as part of your mortgage. It is possible to avoid the additional cost of PMI by putting 20% down at closing, which can represent a significant savings. Many home buyers conscious of the impact PMI can have on their monthly payments attempt to stay within a budget where putting 20% down is possible in order to avoid this additional cost. If you do have PMI included in your mortgage, it is important to keep in mind that once the equity you have in your home reaches 20%, you are able to request that your lender cancel the Private Mortgage Insurance going forward.

Points allow you to pay additional money upfront in order to reduce the interest rate. Depending on the “cost per point”, this can result in significant savings over the life of the mortgage.

ARM or Adjustable Rate Mortgages are exactly what they sound like, and allows the interest rate to change with market conditions. While an option, many home buyers elect for a Fixed Rate Mortgage for the peace of mind it provides.

VA Loans are low rate mortgages available to veterans and active military. If you have, or are presently, serving our country, this is an option that can offer an interest rate cheaper than is available in a traditional mortgage.

FHA or Federal Housing Administration Loans are mortgages available to first-time home buyers with modest incomes and is insured by the Federal Housing Administration. Due to the lower risk these mortgages represent to the lender, there are often much less stringent and more flexible requirements in order to meet approval. While FHA Loans make home ownership a possibility for many home owners that may have difficulty getting pre-approved for a traditional mortgage, they do come with additional costs and insurances specific to them.

They don’t negotiate the lender’s fees

The fees associated to buying a house can add up quickly, but they aren’t set in stone. Often, your lender is willing to negotiate or even waive some of their own fees! Some lenders will even negotiate third-party fees such as the cost of your credit report or appraisal costs.

They don’t review Homeowner’s Insurance options with a local insurance agent

Homeowners Insurance is a must in order to protect your new investment, but there are many insurance options available and the process can be confusing. For this reason, it is important to consult with a local insurance agent able to help you choose the best insurance policy for your needs, and at the best cost for you. There may even be discounts available to you based on safety devices installed in the home (Such as smoke detectors or security systems), the age of the home, or even your marital status! Only a local insurance agent with knowledge of the industry and unique needs of our area is able to look for the best coverage and rate for you.

We hope you found this information helpful, and would like to congratulate you on your new home! Should you have a need for any of our services, such as Asbestos Abatement, Mold Remediation, or Radon Mitigation, please don’t hesitate to contact your local Disaster Blaster!

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