Common Mortgage Mistakes

One of the biggest investments a person has to contend with is purchasing a home. Buying a home entails a lot of money and dipping into your personal savings and other financial resources that you have saved and stowed away. Unfortunately, for most people, buying a home and getting a mortgage is a very confusing process. That is why it is very important that you make the proper research and ask for advice from your friends and family so that you can get more information that can help you in going through the process of buying a home. With mortgages taking from between 25 to 40 per cent of your gross income, it is very important that you make well informed decisions so that you won’t have to make any costly errors. Below are some common mistakes that people often make when going through the process of buying a home or refinancing an existing mortgage. It would be a good idea to take note of these mistakes so that you can recognize them and avoid committing these errors.

Shopping around for a house without knowing if you received pre-approval.


First and foremost, a pre-approval is a different from a pre-qualification. The pre-approval process is a much more complete procedure compared to a pre-qualification. A pre-approval means that you are considered as akin to a cash buyer, which gives you more negotiating power with sellers. A pre-approval can sometimes mean the difference between getting the home that you want or not. It also gives you the opportunity of saving more money because you can have more leverage in terms of negotiations. You should know that most real estate agents will not even entertain you if you are not pre-approved because it will just be a waste of time for both you and the agent. So ask for pre-approval first before looking for a house.




Settling for verbal agreements.

Do not sign a contract that is given to you by a real estate agent in which the terms or other stipulated terms are not the ones he committed to you verbally. Remember that a written agreement will have more teeth than just a verbal agreement. If a real estate agent promises something verbally ask that it be committed in writing so that you won’t be short-changed.

Settling with a lending institution because it offers the lowest rate and/or not getting a written estimate.


The rate is not the only important aspect of a loan. You should look at the total cost of the loan to you. What this means is that you should assess the annual percentage rate, the loan fees, and even the discounts that may be given to you. But you should not limit yourself to just this kind. You can also ask for the opinions of family and friends or ask for referrals or recommendations from them.

Settling for a particular lending institution because it was recommended by your favorite real estate agent.

Your agent may be in the real estate business but it does not automatically mean that he is also a financial expert. This means that he will not have the expertise to know what loan would be right for your exact personal requirements. Real estate agents, since they work closely with lending companies, would usually refer certain companies to you. But this does not mean that the company will also give you the best rates or fees. Real estate agents may also just refer you to loan companies where they have friends – again, not a guarantee that you will also get the best rates and fees. Do not rely on these recommendations. Instead, make your own research. A good way to do this is to compare the prices of at least three mortgage companies. Only after you have done this should you make any concrete decisions.

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