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Mistakes to Avoid When You’re Getting a Mortgage – Part 2
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Brady Webb
When it comes to getting a mortgage, many potential mistakes can be made that can have significant consequences. It is important to understand the mistakes to avoid when getting a mortgage so that you can make the best decisions for your financial future. Part 2 of this article will discuss four additional mistakes to avoid when getting a mortgage. Let’s pick up where we left off.
4 More Mistakes to Avoid When You’re Getting a Mortgage
- Not Considering Your Loan-to-Value Ratio. The loan-to-value ratio is a criterion that lenders use to assess the risk of offering a mortgage. The loan amount determines this figure compared to the home’s market value. Several federal mortgage programs have set LTV limits that must be met to qualify. If the LTV exceeds 80 percent, the borrower may need to purchase private mortgage insurance. Alternatively, the LTV can be reduced by increasing the down payment. Government-backed loans, such as FHA and VA, may offer higher LTVs, with the FHA requiring a minimum of 3.5 percent down payment, which is an LTV of 96.5 percent. Certain VA loans can be obtained with an LTV of 100 percent.
- Not Getting a Home Inspection. Avoiding a home inspection could save you some cash initially, but it could come back to bite you in the long run. Ignoring potential red flags like mold, plumbing issues, and termites can mean incurring hefty expenses. The cost of dealing with these issues after the fact can be much greater than the expense of a home inspection.
- Not Considering Closing Costs. Closing costs are fees you have to pay when you purchase a house. These costs can range from two to five percent of the home’s purchase price and are typically due when the transaction is finalized. Common fees that are a part of closing costs include an appraisal fee, home inspection fee, loan application fee, credit report fee, and document preparation fee. Negotiating some of these fees may be possible, but some cannot be avoided. Additionally, you can buy mortgage points, which will reduce the interest rate on your mortgage and possibly your monthly payment, by paying a percentage of the total mortgage amount upfront.
- Adding Too Much Debt. Your debt-to-income ratio is a measure that lenders use to help decide if you can afford a mortgage. This ratio is calculated by taking your total monthly debt payments and dividing them by your monthly income. Generally, lenders want a debt-to-income ratio of less than 43 percent, but some may prefer a less than 36 percent ratio. If your ratio is too high, you may have to settle for a less expensive home or save up for a bigger down payment to qualify for a mortgage loan.
Conclusion
When it comes to getting a mortgage, it is important to be aware of some common mistakes that can be made. More importantly, it is important to ensure that all of the paperwork is in order and to be mindful of any late payments, missed payments, and other potential financial issues that could affect the loan. By taking the time to understand the process and ensuring that all the details are in order, you can ensure that your mortgage is the best deal for you.
Apply For a Mortgage Today at American Mortgage Solutions
At American Mortgage Solutions Florida, we finance home buyers’ and homeowners’ dreams! We’re here to make the mortgage process itself a dream, quickly and easily matching you with the ideal loan for your needs. Serving Florida, Kentucky, Indiana, Colorado, Missouri, and Tennessee, our streamlined process makes it a breeze to buy a home, refinance, or tap into your home equity. If you need a mortgage loan in Cape Coral, FL, we’ve got you covered! Get in touch with us at (502) 327-9770 for Louisville KY Office and for Cape Coral FL Office (239) 766-8344 today to see your options!
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Licensed in: FL, KY, TN, IN, CO, TX
FL-MBR1574, TN-135166
These materials are not from HUD, FHA, the USDA, or the VA. These materials were not approved by any government agency. They are independent of any government agency. We are not in any way affiliated with any organization listed or referenced within this website, including HUD/FHA/USDA/VA. The inclusion of various education, information, web links, or materials are not an endorsement of the Sender or any of its employees or business partners. For information directly from HUD/FHA, visit https://www.hud.gov/guidance For information directly from the VA, visit http://www.benefits.va.gov/HOMELOANS/ For information directly from the USDA, visit http://www.usda.gov/wps/portal/usda/usdahome?navid=GRANTS_LOANS