Five Common Mistakes To Avoid While Shopping For A Mortgage

Posted on October 1, 2009
Filed Under VA Mortgage Blog |

Five Common Mistakes To Avoid While Shopping For A Mortgage

The mortgage industry is evolving. At present, it is particularly important to perform your homework and select a reputable lender. It is even more essential to stay away from the familiar mistakes that borrowers commit while shopping around for mortgages.

Mistake 1: Failure To Get A Truth in Lending Act (TILA) Disclosure

In different ways, the Truth in Lending Disclosure is more significant than the Good Faith Estimate or GFE. The Good Faith Estimate includes various fees that are not regulated by the lender, for example county fees, title fees and so on. The Truth in Lending Disclosure, nevertheless, demonstrates the overall cost of taking out your loan. This is denoted as the mortgage APR or Annual Percentage Rate. APR shows the true borrowing costs of securing a loan. It is essentially interest rate along with closing costs.

If you’re obtaining a fixed rate mortgage without points, your mortgage APR must be quite proximal to your interest rate. If the mortgage APR is considerably higher than your interest rate, look out for hidden costs.

Mistake 2: Going For The Cheapest Loan

The cheapest loan is not the most suitable choice at all times. Ultimately, you would come across a lender who offers “definitely no closing costs”, “matchless rate” and so on. You should be suspicious about these offers. The aim of the loan officer is to have you request for the loan and make a commitment. When you have done it, you’re essentially at the mercy of the lender. Hence, select cautiously and ensure that the terms and conditions of the loan would not vary when you have locked in your rate. It is very much crucial to select the lender with whom you feel at ease, irrespective of rate. If you determine to engage in skydiving, would you buy the most low-priced parachute, or the one that would work while pulling the cord?

Mistake 3: Not Comparing Apples to Apples

If you request mortgage lender X to cite you a fixed interest rate, don’t allow mortgage lender Y to cite an adjustable interest rate. In addition, only since mortgage lender X has the most reasonable fixed rate, it does not imply he would also offer the most affordable adjustable interest rate. Everybody has their niche. So you should compare apples to apples.

Mistake 4: Request for a Rate Quote Prior to Filling out an Application

Do you feel that a lender can provide you an exact rate quote on the basis of your name, residential address and Social Security Number? This is a well-known yet wrong belief. It is always best to take 15 minutes time and talk about your employment record, residential history, your income, your assets and liabilities and certainly your credit score. If you don’t have an idea about your credit score, collect a copy of your credit report from a dependable source like Gofreecredit.com or Freecreditreport.com.

Mistake 5: Shop for various lenders at various times

Mortgage rates vary on a daily basis and on certain occasions, hourly. If you visit mortgage lender A on Monday, then visit mortgage lender B on Monday, as well. By Tuesday, the rates would vary extensively.

Most of the time, all mortgage lenders offer money from the same container. If you’re confused, check mistake 2.

You now have the understanding that you require to make a knowledgeable decision and shop around for a mortgage. You can set off with websites like Lendingtree.com and obtain many offers within 24 hours or you can explore a bank in your neighborhood.

This Article Is From Guest Author

Sandy Thomson

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