Mortgage Mistakes First-Time Buyers Should Avoid

If you're nervous about taking out your first mortgage, you should be. Foreclosures are rampant today because of uninformed buyers taking out excessive loans with bad rates and banks pushing these terms on the unsuspecting. While there are more safeguards in place now to prevent unprepared new homebuyers from falling into those same traps, you still have to do the research and carefully review all of the documents before making the commitment. To help you get started, here are some of the most common mistakes to avoid.

Eager first-time buyers are often so enthusiastic about the potential on the market that they don't wait until they will qualify for a better mortgage rate. Don't start house hunting until you have raised your credit score, paid off other debts, saved up for a sizeable down payment, and have a three to six month emergency supply fund set aside. Not only will you get better terms, but these measures will protect you from defaulting when the going gets tough. If you find yourself suddenly unemployed or saddled with huge medical expenses, you'll at least be able to keep yourself afloat until you can come up with a new plan.

Speaking of financial preparation, setting a down payment goal and sticking to it is crucial. While 10% is generally the minimum, you will be much better off with 20% or greater. Never shop around during this time. Not even to "price" the local market. The reason is that if you fall in love and haven't reached your goal, you are much more likely to cave. Dieters don't go to the ice cream shop to browse, so don't get ahead of yourself and start visiting open houses.

Have you checked for government programs and assistance yet? First-time homebuyers programs can offer greatly reduced interest rates on your mortgage. Not everyone will qualify, but some areas have several programs available. Check on a city, state, and nation level to be sure that you cover all bases and compare all of the options.

Think the fee on the real estate listing is what you're going to pay? You're dead wrong. Many agents and banks will tack on endless fees and overpriced services that you won't even notice unless you look over everything you sign with a fine-toothed comb. While it can seem tedious, you should take the time to review all charges and question them. In many cases, a bit of incredulity over credit check fees or printing costs will be enough for them to get removed. If it isn't, find a less shady lender.

So what is the biggest mistake people make when taking out a mortgage? They're not being realistic. You can't depend on huge salary rises every year or an inheritance to help pull you through. If you can't afford to make monthly mortgage payments for the foreseeable future on your current earnings while still maintaining a comfortable lifestyle and saving adequately, it isn't time to borrow yet. Don't rush into the decision.