For most of us, a home is the biggest purchase we will make in our lifetime. Because of this, it’s important to make sure you are making smart decisions throughout the mortgage process. Check out some of the common mistakes that you should avoid.
NOT DOING RESEARCH
There are several different mortgage products available and you need to do your research to find which one will work best for you. This includes conventional, government backed, fixed or adjustable rate, etc. If you need some guidance along the way, our mortgage advisors are a great resource. They will sit down with you, take a look at your finances, and help you decide which mortgage option best fits your situation. Cyprus offers some of the lowest rates and fees in the industry, making us a great option for all of your mortgage needs.
PRE-QUALIFYING VS. PRE-APPROVAL
There is a HUGE difference between being pre-qualified and being pre-approved for a mortgage. For pre-qualification, there will be a basic overview of your financial information, but there is no paperwork involved. This is to give you a general idea of how much of a loan for which you are eligible. Pre-approval is when you actually fill out paperwork and walk away with a guaranteed loan offer. Since pre-qualification is inexact, there may be a discrepancy between that and what you can actually borrow. So you may find the house of your dreams only to discover that the loan you are approved for doesn’t cover it. Pre-approvals are usually good for about 120 days, which is great when you are ready to make an offer.
PAYING TOO MUCH
Your monthly house payment; which includes the mortgage payment, property taxes, association fees, and insurance, should NOT exceed 28% of your monthly gross income. Spending too much on your mortgage can make it difficult to pay for other aspects of your life. This is more commonly known as being ‘house poor.’ Just because you can ‘theoretically’ afford a home, doesn’t mean you should buy it.
NOT ACCOUNTING FOR EVERYTHING
There’s more to owning a home than the monthly mortgage payment. You should budget about 1 to 2 percent of the home’s value for routine maintenance every year. So if your home is valued at $200,000, you should have anywhere from $2,000 to $4,000 set aside. If you don’t end up spending that money in a calendar year, roll it over to next year. The older and larger your home, the more repairs and fixes it will require down the line.