A mortgage is a huge decision as it is one of the biggest debts that a person can take against one of the most expensive purchases that they will ever make. Buying a house is a huge investment and taking out a mortgage against it is not a common practice but it has to be one of the most calculated decisions of your life.
If you have not taken out a home loan ever before, do not let the enormity of the decision scare you. Make smart choices by making a budget that will help you realize what is affordable and what is not. Look for good interest rates and low fixed monthly payments.
Here are some of the mortgage mistakes that you can avoid to become a happy owner of your home and lead a life of financial security.
Include all the costs
When seeking out a mortgage, be sure to add all the costs that you think will be added to the expense after owning your home. In your annual budget include 1% to 2% of the purchase price of your house for maintenance purposes. If your house costs £200,000, be sure to set aside £2000 to £4000 aside for necessary purchases like a water heater or having your plumbing fixed.
It is possible that this money will have a fluctuating flow and you might be able to save some money for other pricier things.
Be aware of property tax in your area and check when the tax increases and at what rate?
Not looking at options
It may happen that in the rush of finding a house and lender you might not visit many lenders and go with the one you think is the best. Not a good idea at all. Going with the lender you think is best is never a good option because let’s face it you don’t know much unless you explore other options.
Check every deal in town and look for the lender that can offer you the best long term interest rates.
Never make the mistake of ignoring APR. There are many lenders that show low interest rates but make up for it from high fees. APR is what the actual amount you’re going to pay by the end of the year. A loan may have higher interest rates as compared to another but if its APR is lower, go with it.
Your credit report plays a very important part in getting you good interest rates for your mortgage. If possible, check your credit report six months or a year before you apply for the mortgage so you can have time to fix errors that you may find in the report.
Try to use less than 20% of your available limit on the credit card and pay down loans on time to keep your credit score up.
If you have a bad credit score, you will qualify for expensive mortgage insurance premiums.
Take these precautions before applying for a mortgage and you will be able to manage all your payments and lead a fulfilled life without having to cut too many of your everyday spending.