Is your house a beloved mansion of peace and tranquility? Or is it the exact opposite?
The answer to this question might depend on your mortgage. Getting an affordable property of your choice at a great price can make you feel as if life is sweet. However, this whole mortgage deal is a trick or treat kind of a thing. Where on one hand it can play tricks on you, on the other
What’s so tricky about bad advice on a mortgage is that it often sounds like good advice and people end up messing their finances for many years to come by listening to that “good” advice. This usually happens because at times, what you hear seem smart but it may not be smart on your end.
Here we have rounded up a list of the worst advices you’ll need to avoid and tackle the situation wisely.
Worst advice 01: “oh pre-approval isn’t important”
You will find many wannabe mortgage pros giving you this piece of free mortgage advice. While getting a pre-approval for a mortgage isn’t necessary, but it can result in smoothing the entire process. A pre-approval can actually help you give an idea of how much you can afford to spend on a house.
A pre-approval lets your lender have a look at your income, debt and assets to determine the maximum you can afford. Getting a price point before searching for a house means you can save time looking at homes you can’t buy.
Worst advice 02: “doesn’t matter, all mortgages are equal”
Anyone who says this has simply no idea about home loan programs. Indeed all mortgages serve the same purpose, which is to provide loan to the homebuyers. But there are different programs for different types of borrowers. Thus, not all mortgages are equal.
You need to ask your loan officer to find the best suitable programs for you. Some programs work fine with a lower credit score, a higher debt percentage, and a lower down payment. Go with what suits your situation appropriately.
Worst advice 03: “don’t worry! You can borrow as much as you like”
You are definitely going to come across this type. People will encourage you to borrow at your max and purchase the dream house. This may sound nice, but practically it’s not the wisest thing to do.
Borrowing less than you can afford may get you a smaller house. But on the brighter side, you can live easy with the smaller mortgage payment and down payment and fewer closing cost.
Worst advice 04: “who even reads the terms and conditions, sign away already!”
Remember what you are about to sign may decide your financial situation for a few years to come. So you better read it slowly, and very carefully. If something seems off, ask questions!
Worst advice 05: “low interest rates all the way!”
Some very enthusiastic know-it-all free mortgage broker is definitely going to advice you this. A low interest rate obviously means low monthly payments, which is a good thing but not in the long run. This is because it may come with a number of unfavorable caveats.
For instance, you can go for ARMs (Adjustable Rate Mortgages) while they are a convenient option, but they only have a fixed rate for the first three to seven years, then there are rate rests every year. Still, they are quite a valid option.