Nowadays, enticements to borrow are as common as a credit card offer in your mailbox, such as for home equity loans and lines of credit. As a borrower, use these tips to avoid common mortgage mistakes:
Mistake # 1: Not knowing which mortgage fees the borrower can and can not negotiate.
Mistake # 2: Trusting the first loan officer interviewed. Be sure to shop around.
Mistake # 3: Using an interest-only or payment option adjustable rate loan to qualify for a more expensive house.
Mistake # 4: Thinking the interest rate is always the main thing.
Mistake # 5: Not comparing the final fees listed on the closing documents to the upfront estimates and good faith estimate. Do not allow the lender to pack the loan with add-on fees without the borrower's knowledge.
Mistake # 6: Not knowing if the mortgage has a pre-payment penalty until it's too late, such as when the borrower decides to refinance or pay the mortgage off early.
Mistake # 7: Thinking that renting is always a waste of money. If you can rent cheaper while saving money to buy your first home, it's not unnecessarily an unwisely decision.
Mistake # 8: The borrower does not know if he or she is paying a back-end yield spread or service release premium – fees paid to brokers and loan officers for making loans with higher interest rates.
Mistake # 9: Paying for mortgage life insurance, credit insurance or other expensive but unnecessary lender add-ons.
Mistake # 10: Paying hundreds of dollars to have a company set-up a bi-weekly mortgage payment plan, which is something the borrower can generally do at no cost.
If you are a borrower, use the following tips to ensure you get a fair deal.