Buying your new home in Texas can be both exciting and stressful. You not only have to find the perfect location but also have to search for the best mortgage company in Dallas, TX.
Because of the increasing real-estate prices in Texas, finding an affordable home at your desired location can be challenging.
One of the most critical steps in the home buying process is acquiring financing. Unless you have tons of cash or savings, you’ll have to apply for home loans and mortgages.
You can find hundreds of articles talking about what you should consider before applying for a home loan. But one topic that doesn’t get discussed enough is what mistakes you should avoid when applying for a loan or a mortgage.
That’s what we’re going to discuss in today’s post – the 10-most common mortgage mistakes to avoid when buying a home in Texas.
So, let’s begin…
1. Not choosing a local lender
The biggest mistake potential homebuyers make is they pick a lender based on reviews and testimonials they have on their website. But what’s more important for you is to choose someone who’s based in Texas.
Only local lenders have the ability and experience to help assist Texas-based buyers.
Lenders working outside Texas wouldn’t be able to provide genuine advice and quality service either. Local lenders are aware of the local real-estate laws and market conditions.
There are many ways you can find the best mortgage lenders in Texas. You can ask your local real estate agents or also search for them online using relevant search keywords and phrases.
2. Getting pre-qualified, not pre-approved
You’re probably familiar with the terms ‘pre-qualified and ‘pre-approved.’ Many people confuse these two terms assuming they’re the same.
A mortgage pre-qualification is usually issued by a lender without conducting any prior research. In most cases, a piece of paper is issued that is solely based on the details provided by a borrower. The trouble is, many times, the information provided by the borrower is incorrect, making the entire concept of pre-qualification suspicious.
A mortgage pre-approval, on the other hand, is only issued after a lender analyzes and reviews the borrower’s details, including pay stubs, statements, credit reports, and more.
That is perhaps the reason the top real estate agents will only accept pre-approvals because they’re research-based and more reliable.
3. Not maintaining your credit score
Your credit history has a huge impact on the success or failure of your loan approval process. Ignoring credit scores is another big mistake potential homeowners make when buying a home.
The first thing that a lender will take and review is your credit report. So, you have to ensure you qualify for the minimum credit score limit required for the type of loan you’re applying for. If you or any of your dependents have credit issues, your lender might offer you higher interest rates or even refuse your application altogether.
4. Believing that all mortgage products are the same
Not all mortgage products are created alike. They come with different lender rates and terms and conditions.
Also, you can’t randomly choose any solution for your needs. Is a conventional loan or a government-backed loan better? Do you need financing for the short-term or long-term?
Thus, before you start researching different financing options, make sure you have a list of questions handy that you can ask from your mortgage lender. For example, you can ask:
- Which types of mortgages do you offer?
- What is your interest rate and APR?
- What will be the final cost?
- Whats is your minimum credit score requirement?
5. Adding a bunch of extra debt
Another mistake many home buyers make is they keep on adding monthly debt commitments, which will eventually reduce their chances of getting approved for the loan.
The bottom line?
If you’re planning to buy a home in the near future, avoid additional debts, as doing so will literally ruin your debt-to-income ratio.
6. Not comparing options
Another mistake potential homebuyers make is they don’t shop around for the mortgage.
Now, what does that mean?
It means they pick the first lender they come across without researching different options and comparing terms and rates.
Getting quotes from different lenders will give you a better sense of what you can or cannot afford.
Also, you can negotiate a better deal when you have different options available.
7. Buying a more expensive house than you afford
While you can borrow a certain amount against monthly mortgage payments, that doesn’t mean you should have it all. For example, if you can borrow $500,000, you should opt for $300,000 to better manage your monthly payments. Besides mortgage payments, you have to bear other expenses as well.
Therefore, if you’re a first-time buyer, look for a house that’s below your maximum budget.
8. Ignoring the rate lock
Your lender will ask you to lock in your mortgage rate when filling out your mortgage application form.
Some people ignore this option and move to other parts that they believe are more important.
But the fact is the mortgage rate lock represents a contract between you and your lender, which protects the prevailing rate for a specific period of time.
If you don’t lock your rate initially, you may end up paying a much higher interest rate if the rates were to increase.
9. Not getting an inspection
Skipping a home inspection is another costly mistake many homeowners make while applying for a loan. The purpose of these inspections is to spot major issues and damages.
If you don’t get an inspection, the entire responsibility of fixing those issues will be on you.
10. Changing Jobs
While it is tempting to change jobs, it will significantly impact your mortgage approval process.
One thing your lender is looking for is stable and consistent income. Let’s suppose if you were pre-approved for a loan based on a certain income level, any changes during the process can affect and delay your closing.
