There’s nothing like the moment when you’ve found your dream home. It’s easy to get caught up in the excitement and make moves to finalize everything as quickly as possible. And while timeliness is important, it can lead to mistakes that end up costing you thousands.
Here are the four biggest mistakes people make when securing a mortgage loan.
Mistake #1—Not Shopping Around for Mortgage Offers
It’s tempting to go with the first mortgage offer you receive, especially when you’re eager to close the deal on your new home. According to a LendingTree study, the majority of people (54%) do just that—they only get one offer.
Jacob Channel, Lending Tree senior economist, explains why this is a mistake. “Different lenders can offer different rates to the exact same borrower. With that in mind, the first rate you’re offered may not be the lowest one you can get. The more offers you can look at, the better.”
Think about it: if you only go to one store to compare prices, wouldn’t you miss out on potential savings? The same goes for mortgages! Different lenders offer different rates, and even a small difference in interest rate can translate to significant savings over the life of your loan. The same LendingTree study found that 45% of those who did shop around for a mortgage ended up with a better offer. This means almost half of the buyers who took the time to compare multiple offers saved money.
This summer we helped a first time home buyer. While he said he was comfortable proceeding with his regular personal bank for his mortgage, we encouraged him to at least shop around to make sure he was getting the best deal. Thankfully he listened to our advice and ended up securing an interest rate that was 0.75% lower. That will save him thousands over the life of the loan!
Mistake #2—Relying Solely on Recommendations
It’s great to trust your real estate agent’s recommendations. After all, we work to build strong relationships with lenders and vendors to best serve our clients. However, if your agent only recommends one lender, it can limit your options. Each lender will have different options and tools for securing a mortgage.
The lenders we recommend each offer unique benefits and always work to secure the best loan possible. However, we don’t even know which one will come in with the lowest rate on any given loan! So, checking in with each one is key to getting the best deal.
Aim to get at least two different mortgage offers to compare. Diversifying your lender options can help you find competitive rates and better terms.
Mistake #3—Ignoring Different Loan Types
Not all mortgage loans are created equal. Beyond the typical 30-year fixed-rate mortgage, there are various loan types like adjustable-rate mortgages (ARMs), FHA loans, VA loans, and USDA loans, each with its benefits and drawbacks. Ignoring these options might mean missing out on a loan that could better suit your financial situation.
This is another reason that it’s important to shop around. Each lender may have access to different types of loans. Discussing all of them will help you understand which one aligns best with your circumstances.
Mistake #4—Not Considering Future Financial Plans
When choosing a mortgage, consider your long-term financial plans. Are you planning to stay in the home for a long time, or might you move before 10 years is up? This can influence which type of mortgage loan (i.e., fixed vs. ARM) is a better option for you. Additionally, think about how your income might change over time and whether you might want to make extra payments to pay off the mortgage faster.
Aim to align your mortgage choice with your future financial goals to ensure you’re making the most strategic decision.
Conclusion
Securing a mortgage loan is a significant step in the home buying process, and avoiding these common mistakes can save you time, money, and stress. Remember—it all starts with shopping around! By doing so, you’ll be well on your way to getting the best mortgage deal possible.
Do you need some recommendations on vetted mortgage lenders in Northern Virginia or the Eastern Panhandle? Contact us at info@raisethebardmv.com and we’ll connect you!