Making the wrong choice with your mortgage can cost you dearly.
- A mortgage is the biggest debt that most people have.
- Mistakes with your mortgage could be costly and could even lead to foreclosure.
- Not shopping around is just one common mistake that potential borrowers should avoid.
If you’re buying a house, chances are you’ll get a mortgage at the same time. Mortgages are large debts with long repayment terms, so you may end up paying a lot of interest and dealing with your mortgage lender for many years.
So if you’re buying a house in 2022, there are a few crucial mistakes you definitely want to avoid when getting your home loan. Here is what they are.
1. Borrow more than you can afford
Taking out too much of a home loan could quickly turn into a financial disaster. You’ll be working on paying off your mortgage every month for decades.
If you have borrowed too much money, you will be under constant financial pressure and may have to make unsustainable sacrifices. A single financial problem could also put you at serious risk of foreclosure, which could lead to financial devastation.
2. Take out a mortgage you don’t understand
Many mortgages have simple terms. If you take out a fixed rate mortgage, you will know in advance exactly what your monthly payments will be and the total costs. But other loans, such as variable rate mortgages or balloon mortgages, can be much riskier and have uncertain costs.
You never want to be surprised with a mortgage payment you can’t afford, so make sure you understand exactly how your loan works. This means knowing if the rate or payment might change over time, what you’ll need to pay upfront to get the loan, and how much your loan will cost you each month and over the entire repayment period.
There are many types of mortgages and tons of different lenders offering home loans. As a result, a loan from one lender could potentially be much cheaper and easier to obtain than a loan from another.
If you don’t shop around for a mortgage and compare offers from various lenders, you could end up with a loan that’s not right for you. You could end up making much higher monthly payments and incurring higher total loan costs than you would with another lender, or you could end up with high upfront fees that aren’t really necessary.
Since a mortgage is a loan that is repaid over a long period and you are borrowing a lot of money, even small differences in rates or fees can add up and affect your financial life. To ensure you get a good deal, you should get several loan quotes so you don’t pay too much.
It’s easy to avoid these mortgage mistakes if you know them from the start. It’s worth making the effort not to take them on, because your home loan will likely be the biggest debt you’ll ever take on.
A Historic Opportunity to Save Potentially Thousands of Dollars on Your Mortgage
Chances are, interest rates won’t stay at multi-decade lows much longer. That’s why it’s crucial to act today, whether you want to refinance and lower your mortgage payments or are ready to pull the trigger on buying a new home.
Ascent’s in-house mortgage expert recommends this company find a low rate – and in fact, he’s used them himself to refi (twice!). Click here to learn more and see your rate. While this does not influence our product opinions, we do receive compensation from partners whose offers appear here. We are by your side, always. See The Ascent’s full announcer disclosure here.