Not figuring out how much house you can afford
Without knowing how much house you can afford, you might waste time. You could end up looking at houses that you can’t afford or visiting homes that are below your optimal price level. Use a mortgage affordability calculator to help you know what price range is affordable, what’s a stretch and what’s aggressive.
Getting just one rate quote
Shopping for a mortgage is like shopping for a car or any other expensive item: It pays to compare offers. Mortgage interest rates vary from lender to lender, and so do fees such as closing costs and discount points. You can apply with multiple mortgage lenders. All mortgage applications made within a 45-day window count as just one credit inquiry.
Not checking credit reports and correcting errors
Mortgage lenders will scrutinize your credit reports when deciding whether to approve a loan and at what interest rate. If your credit report contains errors, you might get quoted an interest rate that’s higher than you deserve. That’s why it pays to make sure your credit report is accurate. You may request a free credit report each year from each of the three main credit bureaus. And, you may dispute errors that you find.
Making a down payment that’s too small
You don’t have to make a 20% down payment to buy a home. Some loan programs enable you to buy a home with zero down or 3.5% down. Sometimes that’s a good idea, but homeowners occasionally have regrets. Figuring out how much to save is a judgment call. A bigger down payment lets you get a smaller mortgage, giving you more affordable monthly house payments. The key is making sure your down payment helps you secure a payment you’re comfortable making each month.
Emptying your savings
If you buy a previously owned home, it almost inevitably will need an unexpected repair not long after. Maybe you’ll need to replace a water heater or pay a homeowner’s insurance deductible after bad weather. Save enough money to make a down payment, pay for closing costs and moving expenses, and take care of repairs that may come up. Lenders will give you estimates of closing costs, and you can call around to get estimates of moving expenses.
Shopping for a house before a mortgage
It’s more fun to look at homes than it is to talk about your finances with a lender. So that’s what a lot of home buyers do: They visit properties before finding out how much they are able to borrow. Then, they are disappointed when they discover they were looking in the wrong price range (either too high or too low) or when they find the right home, but aren’t able to make a serious offer. Talk to a mortgage professional about getting pre-qualified or even preapproved for a home loan before you start to seriously shop for a place.