If you’re in the market to purchase your first home, it can be easy to go into the entire process with a variety of misconceptions – which in turn open you up to costly errors. The following is the first installment of a two part guide to some of the most common mistakes buyers make when they start and go through the homebuying process, and how to avoid them.
Assuming you’ll get the best rate or loan at a big bank
While a larger bank may have more resources, it may also be subject to stricter internal rules and regulations that limit your options when it comes to picking the loan that is right for you. A smaller, non-depository lender may be able to offer a more customized loan product, with more flexible rates and qualification standards. Your best bet to find the loan that is right for you is to shop around with several lenders and get a few different offers – but not so many that your credit is hurt by multiple inquiries.
Waiting too long on a good rate
A mortgage is a significant, multi-year investment, so it makes sense that a buyer should consider things carefully before they make a decision. That said, if you find yourself eyeing an attractive rate, keep in mind that interest rates fluctuate frequently. Waiting too long can mean that rates go up, potentially costing you thousands more over the lifespan of your loan.
Only paying the minimum monthly payments
While mortgage interest rates are traditionally much lower than other forms of credit, you can still save money by making more than the minimum payment on your principle.
Consider discount points
Mortgage discount points can be a useful tool to help lower upfront costs related to closing or fees, but can in the long run make your loan more expensive depending on how long you stay in your home. Discuss how mortgage discount points will impact the total amount you pay carefully with your lender.
Remember, the slightest change can save the borrower thousands over the life of the loan. Every detail matters, which is why the most highly trained loan officers – typically those of the private, non-deposit lenders – are often the best option for more complex loans.