3 Most Expensive Mistakes People Make With a New Home Loan
Whether you're a first-time home buyer or you're buying a new home, the process can be overwhelming. You have to deal with finding both a home and a good lender simultaneously. However, neglecting even the smallest of details can be costly, and many borrowers later find themselves facing expenses they did not plan for. This article explains the three most expensive mistakes borrowers make. Knowing what to watch out for can save you thousands of dollars.
They Don't Compare Lenders
It is easy to go with a lender you know, possibly even the lender who financed a previous mortgage. However, its always best to get several quotes from different companies in order to ensure you're getting the best interest rate. A higher interest rate could cost you thousands of dollars over the life of the loan.
They Don't Have Their Home Inspected
Having your home inspected can cost several hundred dollars, but it can save you thousands of dollars in the long run. Inspectors can check for things like bad wiring, weak foundations, mold, etc. These problems can cost you thousands of dollars to repair, so its best to either avoid homes with these types of problems or plan on the costs of repairing it in the total amount you're willing to spend on your mortgage.
They Borrow More Than the Home Is Worth
When you borrow more than the appraised value of your home, it represents a higher risk for your lender. Higher risk loans equal higher interest rates. Many borrowers take out higher amounts on their mortgage loans to make improvements on their home, assuming that its value will increase after the improvements are made. However, your lender will not calculate your interest rate based on what improvements you've made; they will base it on the value of your home before you purchase it. So, unless you plan to refinance within a few years, its usually better to borrow less and save money for improvements.
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