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Five Terrible Mortgage Mistakes Leading To Troubles


When you are planning to purchase a new home or do a mortgage refinance, there is quite a bit to think about and to do.  If you want things to go smoothly, here are five terrible mortgage mistakes you will want to plan to avoid: 


1.  Because all of your funds that will be due at the closing of the loan including the down payment need to be seasoned, your first mistake would be not to have that money in a bank account where is has been sitting for at least 2 to 3 months. 


2. Loan approvals require quite a bit of documentation, whether you are mortgage refinancing or purchasing a new home.  Even if you have plenty of money in the bank and impeccable credit, you will need things like a government issued photo ID, recent bank statements, paycheck stubs, W-2 forms, and even income tax returns.  You may be surprised that there is more documentation required now than in years past, but federal regulations require it, so have it in order or you could prolong the process or not be approved. 


3. Don't underestimate the amount of cash you will need in the bank in order to close.  Although the down payment may be the largest amount you will need, there are lots of other closing costs that will be tacked onto it.  Such things as lender fees, title fees, up to 12 months of homeowner's insurance premiums, and one or two months of house payments in reserve.  If you are applying for a bad credit mortgage, you may need even more in reserves. Your lender can give you a pretty close estimate of what all of these costs will be. 


4. When looking at different lenders, be sure you are comparing the same thing.  Never compare a simple rate to an APR.  The APR is the best way to go because it factors in all of the closing costs.  You should also make sure that the terms of the loans you are comparing are the same, for instance you can't compare a 30 year loan to a 20 year loan from different lenders. 


5. Telling a little white lie in order to get your financing can be considered fraud.  If you misrepresent the facts on your loan application or if you omit certain facts, you could be guilty of a felony. Simply fill out the application truthfully and to the best of your knowledge, and you should be just fine. 


By being aware of these five terrible mortgage mistakes, you should be able to avoid them and the whole process will go more smoothly.