Personal Finance

7 Worst Mistakes to Make with Your Mortgage

3. Forgetting about the Fees and Closing Costs
A mortgage is not just about the amount that you are going to finance. Other fees and costs come before setting up said mortgage.

Generally, you have to put some kind of a down payment on the home if you are buying. This is not usually the case if you are refinancing, but whether it is a refinance or you’re buying, most lenders charge closing costs and fees.

Since these are generally out-of-pocket expenses, it’s important to be aware that these fees and costs exist and find out what fees and how much the lender is charging.

4. Maxing Out the Amount You Mortgage
Have you heard the expression house poor? If you buy more of a house than you can afford, then you become house poor because all of your money is going toward your mortgage.

Keep in mind that the amount a mortgage lender approves you for and the amount you can actually afford are two different numbers. For qualifying purposes, a lender does not factor in your insurance payments and your utility bills. In other words, they are not basing your qualification on the total amount in bills you have to pay out each month.

You, on the other hand, should be thinking about all of your expenses and whether or not adding that mortgage payment, taxes, and insurance on the property is keeping you in the black or sending you into the red.

5. Not Reviewing Your Own Credit
Especially after the mortgage crisis in the not-so-distant past, mortgage lenders are taking a long hard look at credit history and credit scores. Before you even think about applying for a mortgage, review your own credit.

Look for any blemishes or inaccuracies on your credit. If anything pops up, work directly with the creditors to correct, fix or remove the blemishes or inaccuracies.
Remember, credit can make or break your ability to qualify for the mortgage and can even affect the interest rate you pay, so you want your credit to be in tip-top condition.

6. Thinking All Lenders are the Same
Just like all mortgages are not the same, all lenders are not the same either. Some lenders charge fees that other lenders do not charge, so shop around when you are trying to obtain a mortgage. Don’t stop after talking to one lender.

About the author

Kristie McCauley

Kristie McCauley

Kristie Lorette McCauley is an award-winning expert on personal finance, mortgages, and credit. She has published articles on major finance and credit blogs, such as Yahoo! Finance, Quizzle, Money Crashers, and BankRate. She is also the author of books, such as How to Use the Equity in Your Home or Business Today to Invest for Tomorrow and How to Open & Operate a Financially Successful Personal Financial Planning Business.

4 Comments

  • Great points, another thing I now look at is the ability to pay any additional amount towards the principal (in the easiest possible manner). Some lenders have a program to break your mortgage payment in half, so you pay half of your mortgage biweekly – this can shave years off of your loan. The one disadvantage is that that normally means it MUST be an automated payment. My lender sold our mortgage to another provider who is testing the biweekly payments out but doesn’t have the program in place yet. Unfortunately, they only allow you to make extra payments online, but nothing is applied to the mortgage until you call in and tell them to apply it to the principal – any unapplied funds.

    If you can swing making at least ONE extra mortgage payment per year it helps to shave off years as well. Don’t wait till the end of the year, just make an extra $100/per month payment if you can swing it (or whatever monthly adds up to one whole payment by the end of the year)!

  • Truly Kristie is a knowledgeable financial entity; her observation that insurance, utilities and the like do not appear on the 1003 is almost brilliant. Although, lower credit purchasers who use alternative credit might have to furnish this info to the underwriter, Kristie is 99.9% correct – these budget items should be considered.

    The only weakness in her article is a failure to cleary clarify the impact of ignoring APR in favor of lower interest rates – on the overall early loan termination; i.e. What cost adjustment/corrections occur on the financial end to a purchaser who finances 30 years and opts out at 5 years.

    Kristie has inspired me to write a few articles about mortgages that I will provide for your program at a later date;this is based on last mortgage loan processor & officer training and past service as a loan underwriter & residential & commercial real estate broker.

    I joined because I deem this program a consumer service

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