Mistake: Talking to Only One Lender – 4 Key Lessons
A common mistake made by home buyers is talking to only one lender when buying a home. Usually, first-time buyers only speak to one lender. This may result in losing many thousands of dollars. Buyers who shop around for a loan will usually get a better deal than the first one they find.
Here are four lessons learned by experienced home buyers:
Lesson One — Compare Loan Offers
It is important to compare interest rates, closing fees, and the terms of the mortgage loan.
Other important things include the qualifications required for the approval process, the reputation of the lender, and whether the lender has the option to sell the loan to another party after the escrow closes.
Lesson Two — Protect Credit History and Score
Do not allow a lender to run a credit background check until they are chosen for being the best deal. Instead, check credit history first by getting a copy of the file from the credit bureaus. Dispute any mistake in the credit files to improve the credit score.
Use a copy of your credit history to submit to the lender for a preliminary, non-binding, credit evaluation. Insist that the lender give a quote based on the copy of your credit history and do not allow the lender to run an official credit check until you are ready to move for ward with their general loan offer.
Lesson Three — Mortgage Insurance
Buying who can put down 20%, who have a decent credit history and credit score may qualify for conventional financing that does not require mortgage insurance. A loan without mortgage insurance saves considerable money and has lower monthly payments. For experienced buyers, with plenty of savings to work with, this is a wise strategy.
However, first-time buyers should be cautious about using their entire savings to make the 20% down payment. A safer strategy for them is to put down less and keep four to six months of living expenses in a savings account as a backup in the case of an emergency.
Lesson Four — Variable Interest Rates and Refinancing
Be wary of loan offers that have a low introductory rate that can increase substantially later. For most home buyers, it is better to have a fixed interest rate that can be counted on for future financial budgeting. Make sure the loan has the option to be refinanced without having to pay a significant prepayment penalty.
Not getting the best loan terms is another reason why talking to only one lender when buying a home is not the best strategy.
Choosing the best lender for a mortgage is just as important as choosing the home. Do not make the mistake of talking to only one lender when buying a home. Getting the best offer can save many thousands of dollars. Working with a high-quality lender that has decent lending terms and excellent customer service is a desirable plan. Being able to refinance the loan if necessary, without having to pay a steep penalty, is an important consideration.
Buying your first house? Here’s what can go wrong. https://www.inquirer.com/real-estate/housing/first-time-home-buyers-tips-mistakes-20190914.html