Shopping for a Mortgage? Avoid These Mistakes
3. Not paying attention to fees
Most people in the market for a mortgage know to pay attention to interest rates — but don’t forget about mortgage fees. For example, your lender might charge you a mortgage origination fee that negates its competitive interest rate.
An origination fee is an up-front fee charged by your mortgage company for processing your loan and it could be as high as 1% of your loan amount. This means you could be stuck paying $2,000 on a $200,000 mortgage.
You may, however, be able to negotiate this and other fees your lender wants to charge you, so don’t be afraid to try.
4. Switching jobs during your search
Though your credit score plays a big role in determining whether you qualify for a mortgage, you’ll also need to prove to lenders that you have a steady income that lets you keep up with your monthly mortgage payments.
If you switch jobs during your search and wind up with a higher salary, it could actually help you. But taking a pay cut could hurt your chances of getting a mortgage. If you’re looking at the latter scenario, try to hold off on making a move until your mortgage closes.
Similarly, if you’re a salaried employee looking to go freelance, you’re better off closing on your mortgage and then making that switch. Lenders don’t always take kindly to non-guaranteed, variable income, so there’s no sense in having to deal with extra hurdles if they’re not necessary.
Of course, if you expect your income to decline shortly after signing your mortgage, make sure it will still be enough to afford your home. The last thing you want to do is fall behind and risk foreclosure.
The mortgage you sign could be the same mortgage you hold onto for many years. Avoid these mistakes and, with any luck, you’ll score an affordable home loan that’s easy to manage.