Shopping for and touring potential homes is definitely the fun part of the home-buying process. So what is the not-so-fun part? Applying for the mortgage loan.
Here are two mistakes to avoid to ensure that you love the terms of your mortgage as much as you love your hew home.
Number one. Don’t shop for your home first: Shopping around for the best mortgage rate should be step one in the home buying process. It may even be a good idea to talk to a mortgage broker a full year before you plan or need to buy. Why? If there are any issues with your credit or debts, a mortgage broker can identify them and with enough time, you can take care of them before you have to apply for a loan. Talking to a mortgage broker in advance will give you time to get your affairs in order to qualify for the best rate, could save you thousands of dollars in the long run, and you won’t feel rushed to accept an unattractive loan because you’re worried you’ll miss out on your dream home.
Number two. Stay within your real budget: There is often a big difference between what a lender says you can afford and what you can actually afford. Your debt-to-income ratio, or how much you spend vs. how much you make, doesn’t include the money you spend on hobbies, or the cost of commuting to work, or maintenance and utility costs. If you like eating out more than cooking at home, your food bill may be higher. You have to really sit down and examine your spending habits before committing to the loan amount the lender is offering. You won’t enjoy your home nearly as much if it’s eating into your favorite hobbies.