You’ve finally found the home of your dreams and are ready to start packing. Go ahead – gather up the boxes and start bagging the trash. However, before you get too far down the road, make sure you will have the money to fork over on closing day.
Most people take out mortgages for large real estate purchases. Depending on your particular credit history and credit score, your interest rate and other fees will vary from lender to lender. It’s important to do your homework and choose the lender that offers the best terms based on your personal financial situation.
That being said, everyone has an opinion on the topic of mortgages. One thing is for sure, your mortgage lender is going to examine the deal from every angle. You should be doing the same. Here are some common mistakes that can gum up the works and keep you from crossing the threshold on move-in day.
- Not disclosing all your financial information to the lender: Of course, the application will ask for the basics – name, contact info, income, assets, debts, etc. You may be inclined to skip a few pieces of information that you think may prevent you from getting approved for the loan. The truth is, failure to disclose information is what will get you disapproved. The lender is going to do an exhaustive search before lending you hundreds of thousands of dollars. They’ll find what you are trying to hide. Be up front; you’ll save everyone’s time.
- Failing to hand over all the documentation requested by the lender: There are several pieces of information your lender needs to make a decision about whether you are a good risk. They will want documentation of data you provide such as pay stubs, tax returns, account statements and so many other financial details. The key is in the word “details.” Don’t give the lender “some” of what it wants; collect each and every document requested. Do the homework on your end to collect the documents to save time in the long run.
- Being unrealistic about interest rates: Yes, banks air commercials all the time about mortgage lending programs. Those rates aren’t available to everyone. They are based on credit. Plus, the market moves constantly. Until you lock in a rate, you aren’t guaranteed of anything. Even a slight interest rate hike could make a difference in affordability. When you are sure your deal is going to really happen, seek to lock in rates to protect your bottom line.
A last note: pre-approval is not the same as loan approval. You can obtain a pre-approval letter from a lender rather easily. It’s a simple math equation that involves income vs. debt. In other words, in a perfect world, a person with “this debt” and “this income” should be able to afford “this much” in a home loan. Obviously, the equation doesn’t take into consideration much else – including your credit history. Make sure you get a bank to sign off on an approval figure before you put in an offer on the home of your dreams.
If you are buying or selling a home, you need an experienced real estate lawyer to protect your investment and watch out for potholes along the path from offer to settlement. Contact Joel R. Spivack, Esq. for sound legal advice on your real estate transaction today.