A slight drop in interest rates and pent-up demand for new homes – following a rough winter that kept many prospective buyers inside – are being credited with a surge in homebuyer interest. But while mortgage interest rates continue to hover at historically low levels, buyers shouldn’t become too lax when it comes to the mortgage approval process, industry experts say. Here are a few common mortgage mistakes to AVOID when buying a new home...
1. Not checking your credit report: Mistakes or unexplained problems on your credit report could result in your receiving less favorable financing terms, or even being declined for a mortgage. So it’s best to review your credit report prior to starting the home financing process. Obtain a copy of your credit report – you’re entitled to one free copy per year under the Fair Credit Reporting Act – and resolve any problems or errors. It’s also a good idea to avoid taking out any new credit cards or assuming any significant new debt – such as a car loan – until after you’ve closed on your new home.
2. Not getting pre-approved: Buying a new home can be an emotional process – especially when you stumble across your dream home and want to move full steam ahead with the homebuying process. Buyers who don’t get pre-approved, however, run the risk of investing a lot of time and money into a home purchase, only to learn that they don’t qualify for the needed mortgage amount. By getting pre-approved, you’ll know exactly how much house you can afford from the start, and be in a much stronger bargaining position should you find yourself in a bidding war.
3. Waiting for interest rates to drop: Rates go up and rates go down, and in a competitive housing market, it can be risky to wait too long before securing the financing needed to purchase that new home. Remember to keep current rates in perspective: While in 2013 30-year fixed rates jumped from around 3.4 percent to more than 4.5 percent, those rates are still considered to be quite low historically.
4. Failing to lock in an interest rate: To lock or not to lock in your interest rate? As tempting as it may be to want to hold off and see if mortgage rates come down, the other side of that coin is that rates may also go up. Given that interest rates are still at or near historic lows, it makes sense to lock in your rate once you’ve compared available loan terms and settled on a lender.
5. Not reviewing all loan terms: From interest rates and origination fees to fixed or adjustable-rate mortgages, financing the purchase of a new home can seem like a confusing process. Take the time to go over your lender’s Good Faith Estimate: Review your loan’s annual percentage rate as well as the amount of closing costs you’ll be paying. In addition, remember to check what your final monthly mortgage payment will be once taxes and insurance are included. By reviewing all of your loan terms carefully, you can avoid any unwelcome surprises and ensure that the purchase of your new home goes as smoothly as possible.
To learn about new home opportunities available in Nocatee, visit the Nocatee Welcome Center or call 1-800-NOCATEE.