Taking on a mortgage is a significant responsibility, but it’s also usually an exciting time—you now have your own home! If you’re diligent about your mortgage payments, you can own it outright someday.
In the meantime, you should avoid making any mortgage-related mistakes that could negatively impact your finances. We’ll talk about some of the main ones you should know about right now.
1. Paying Off Debt
Generally, paying off debt is a smart thing to do. However, if you’re about to get a mortgage, paying off debt right before doing so is not always the best policy. Maybe you run your credit and discover an old outstanding balance. Even if you have the funds available to pay off that debt, consider holding off if you’re about to get a mortgage.
The reason is that sudden changes in your debt history will show up as new activity, which sometimes causes your credit score to drop. If you are going to apply for a mortgage, try to pay off outstanding debts six months or a year beforehand. By doing so, there’s no negative mark to harm your score as you’re negotiating with a mortgage lender. If you expect to apply for a mortgage within 6-12 months, consider consolidating your debt now by searching for the best debt consolidation loans. Stay on top of your debt payments. These include credit card debt and student loans. Paying student loans off early can benefit you in terms of simplifying budgeting; you can also save on interest costs by refinancing them into one payment.
2. Not Comparing Rates
The mortgage application process takes time and effort. Because of this, you might not be eager to go through it too many times. Still, it’s worth it to shop around and get at least a few different quotes from lenders if you’re seeking a mortgage.
Your mortgage payments will probably be your single biggest expenditure going forward. That’s why it’s only logical for you to carefully compare all the available rates.
You might find one that’s a fraction of a percent lower than another. It might not seem like much at that moment, but the difference can amount to thousands of dollars as the years’ pass.
3. Not Understanding the Details
If you’ve never done it before, the mortgage application process can be intimidating. It’s helpful to talk to family members or friends who have gone through it, but they’re probably not experts in this area.
That’s why it makes sense to talk to a mortgage specialist who can explain any details that might confuse you. Once you sign the papers, you’re contractually obligated to pay your mortgage. You need to make sure you understand what you’re agreeing to before you take this major step that will impact your finances for years to come.
If you do the necessary research and get advice from a professional, you’ll be much better equipped to decide which mortgage makes the most sense for you. You can also have all the necessary documents ready so that the process goes smoothly.
Take the Best Mortgage Offer
Getting your first mortgage is a noteworthy step in your life. If you do some research beforehand, there’s no reason why you can’t find one that’s appropriate for your situation.
Make sure to talk to a professional, such as a financial advisor, so you know what to expect, and check the different rates so you can pick the one that makes sense for your situation. Finally, avoid paying off debt right before going about the mortgage-seeking process.
If you do all these things, you should soon set yourself up with a mortgage that you’ll have no trouble paying. A time will come when you own your own home, and a tremendous feeling of pride and accomplishment should come along with that.