Mortgage Mistakes Can Be Costly

More on how to avoid home buying errors

As we pointed out in part one of this article, a home is the most expensive thing most of us will ever buy. And yet we often fail to do any research before jumping in the car to go buy one. The failure to plan properly can cost thousands of dollars if you aren’t careful. And all it takes to be careful is to make a few phone calls and do a bit of reading. It’s worth the effort.

Here are a few more pitfalls that await those who fail to plan careful when buying a home.

• Failure to repair credit before applying for a loan. By the time the lender checks to see if you have good credit, it’s too late to repair any problems. You need to start about a year ahead of time. You can obtain a free credit report, find out what sorts of problems you may have and pay off delinquent or late bills long before a lender starts checking on you.
• Failure to get pre-approved for a loan. Being pre-approved means that, in essence, the loan has been granted. This is useful when you are shopping in a hot market and the seller is eager to move the property. Often, buyers are only pre-qualified, which means the lender has taken a casual look at the borrowers’ finances and said, “Yes, you will probably be able to borrow this much money.” Pre-approved, on the other hand, means that that it’s a done deal, and you only need to fill out the paperwork and do it. Get pre-approved ahead of time and the buying process is much easier.

• Failure to look into first time buyer programs. There are many programs available at both the state and Federal level that are designed to make it easier for first-time buyers to get into a home. If you are passing these up, you are leaving money on the table.
• Taking out too large a loan. It costs a lot of money to own a house and you don’t want to be in the position of not having any money left over after you pay your mortgage. What about landscaping? Furniture? If you spend everything on the house itself, you may find yourself using cardboard boxes for furniture. Be careful.
• Not having any money left after closing. Closing costs can be shockingly high. You’ve got to bring a pretty hefty check to the table when it’s time to buy your house, which seems rather odd since you’re borrowing the money to buy it. Still, you will need additional cash after closing to make any necessary repairs or to cover any possible emergencies that may arise.

By planning ahead, you won’t get caught in any one of a number of traps that often catch home buyers off guard. It’s easy to avoid these problems; all you have to do is talk to some people, do a bit of research on the Internet and be patient. Don’t rush into the home buying process. You’re going to be paying for the house for 30 years; it’s worth your while to take a few months to go about it the right way.