Future Military Homeowners

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Stepping into the mortgage process can be daunting for anyone. For many, it seems filled with thousands of forms, terms that are hard to understand, and lots of people who know more than you do and want to take all of your money.

But it doesn’t have to be like that. The first step to making the mortgage process one that works for you is research. Familiarize yourself with terms, know what to watch out for, and go slowly and carefully through the process, reading everything. A mortgage is likely the largest debt you’ll even incur, so paying good attention is critical.

To get you started on the right track, here are some common mistakes made by borrowers that you should avoid when getting a mortgage.

Not checking and addressing your credit score

You wouldn’t walk into a dark tunnel without some way to illuminate the path ahead. So don’t walk into a lender’s office without knowing your credit score. Get your FICO and credit scores online before you want to apply for a mortgage. Give them a thorough examination, and if there are errors, work with the appropriate credit bureau to get them addressed. If you have low credit, you’ll need some time to bring it up by paying off old bills or paying down a credit card.

Only getting pre-qualified before home shopping

Pre-qualified and pre-approved are two very different things. Pre-qualification is basically a casual appraisal of how much of a loan you will probably qualify for. This can help you determine your price range, but isn’t good for much else. Pre-approval involves an in-depth application process, and you’ll get a pre-approval letter to show sellers. This gives you more weight in a multi-buyer scenario and will let you close much more quickly, since most of the paperwork is already done.

Skipping a professional home inspection

This costs a few hundred dollars, but it’s essential. Beyond getting a clearer picture of what condition the home is in, a professional evaluation will give you more leverage when negotiating for repairs. Make sure to get a clause in your contract that details what repairs must be done and allows for compensation for whatever your professional inspection uncovers.

Using an agent that represents both seller and buyer

This seems like a no-brainer, but sellers and agents will push this (and at times offer incentives), so look out for your best interest. Keep in mind that sellers typically pay the real estate commission. Be sure to find a buyer’s agent who will work exclusively for your interests. In most cases, it won’t cost you a dime.

Making verbal agreements that aren’t in writing

Make sure everything you’ve discussed verbally is in the final agreement. It’s a good idea to take notes on every conversation you have with your mortgage broker. You want to avoid surprises come closing time, so make sure to get rate quotes and other key items in writing. Ask about fees and pre-payment penalties, and get those down on paper as well.

Neglecting to budget for closing costs and beyond

Many buyers are shocked when they see how much closing costs can add up to. Generally, they’re between 2-4 percent of the total sale value. You can get an idea of what closing costs will be from your Good Faith Estimate. Make sure you set aside enough funds. Beyond closing costs, it’s a good idea to have three months worth of mortgage payments set aside. The unexpected often happens, and you don’t want to miss your first mortgage payment.

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