The hunting house without being pre-approved
Many home buyers confuse with prior pre-qualification approval. None of your information is verified during the pre-qualification process (which is usually a simple phone call between you and your mortgage broker). During the pre-approval process, your financial information is verified, your credit is drawn, and your application is reviewed by a lender. Many homebuyers go on the hunt in the $ 300,000 price range only to find out later that they are only qualified for $ 250,000. Pre-approval allows buyers to buy with confidence. Real estate sales agents are also skeptical when it comes to buyers’ offers that are not pre-approved. Naturally, they do not want to take the market home only to have the agreement to fall through when the buyer is not able to qualify for financing. If you want the seller to take your offer seriously, get pre-approved and submit your pre-approval letter with your offer. This tactic could only give you the advantage when it comes to competing offers.
Real also: FHA loans and first time home buyers
Failure to take out title insurance
Title insurance offers protection if it is discovered later that the title is imperfect. If a title dispute arises, an owner who has a title insurance policy is protected. Borrowers are required by lenders to purchase title insurance that benefits the lender (to cover the loan amount), but it is up to the borrower or not to purchase title insurance. Title insurance protects the equity of the owner of the homeowner in the home. If a title dispute arises and a homeowner is without title insurance, he can make it really ugly. Some homeowners lose all equity in the house, the house itself and the last, but at least they are still on the hook for the balance of the loan! Unfortunately, some liquidation borrowers pay a mortgage on a home they no longer own because they do not have title insurance titleholders. The good news is the title insurance that the owner is relatively cheap ($ 200 is in the good range), and it is paid only once at the close.
Failure to Review Closing Documents before Closing
Borrowers must sign a stack of documents at closing, and many borrowers are so overwhelmed that they simply sign everything that is put in front of them. Unfortunately, many borrowers are shocked at the closing table when they discover that the FHA loans and first time home buyers terms in the closing documents are not the terms they originally agreed to. The best thing to do is to ask to receive the documents before closing. This can be arranged by your title company, and you can review the documents from the comfort of your own home a few days before the actual closing.
Not knowing your credit score
Most borrowers do not know their credit score, and some are taken advantage of by unscrupulous mortgage brokers. Now that the mortgage bubble has burst, we now know that many borrowers who have been put in subprime loans (for people with credit is not so good) have actually been qualified for conventional loans. However, these unwitting borrowers have been placed in these sub-prime loans because these loans have generated fees from mortgage companies and lenders. You can check your FICO credit score at www.equifax.com, and then you’ll know where you stand before you go mortgage shopping.
Change of job
Lenders seek to verify employment for the previous two years. Your income could be disqualified if you change jobs during the housing loan application process. Changing jobs within the industry even with little or no downtime (30 days or less) is acceptable for most lenders. But remember that changing careers during the loan process could jeopardize your loan. Before making a new job offer, talk to your mortgage broker to determine if the change could disrupt the home loan process.
Buy on credit during the loan application process
Do not take out new credits during the home loan process, even if you are already pre-approved. Remember that lenders can withdraw a loan slip at any time before funds are disbursed. Buying a new TV on a payment plan, renting a new vehicle, or loading furniture before closing could jeopardize your loan. Opening new lines of credit or increasing balances on existing credit lines is detrimental to your credit score. To be on the safe side, do not make changes to your credit profile until after the close.
Choose the good faith estimate with the lowest “total settlement fee”
The GFE is a one-page document that gives an estimate of all charges that may be incurred at closing. The mistake that most borrowers make is that they fail to look at the individual numbers and go straight to the “estimated total settlement fee,” which is located near the bottom of the GFE. GFE charges are beyond the control of the mortgage broker and include such things as title insurance, revenue stamps, phytosanitary inspection, risk insurance, and mortgage loan insurance as well as Pre-paid taxes and insurance. A common mortgage broker tip is to underestimate these charges to make the settlement the total number of charges more attractive. Mortgage brokers are compared, ignoring sections 1100, 1200, 1300, 900 and 1000 of the GFE. The fees for these sections are out of control of your mortgage broker. Instead, focus on section 800, where the real price differences are likely to be seen.
Blocking Period Too Short
If your lock expires, you will be charged either the current market rate or the original locking frequency, whichever is higher. This is the standard policy with lenders. Make sure your blocking period allows enough time to close.