The purchase of a house is perhaps the largest investment you will ever make in your life. If you get things wrong with the financing, you will risk losing your properties in Penang. For many homebuyers, the process of mortgaging appears confusing, filled with thousands of incomprehensible terms. It daunts them and drives them to make mistakes. Keep in mind that a mortgage is most likely the largest debt you'll ever incur, hence demanding your attention and knowledge. Before you decide on taking out a mortgage, do thorough research. Acquaint yourself with the terminologies, know exactly what you want, and make smart choices.

Below are some mortgage mistakes that are too costly to make. Understanding these mistakes will keep you from making them, saving you from financial pitfalls.

1.Not getting pre-approved for a mortgage.

Don't allow the excitement of buying a new house make you forget to apply for a home loan. Approach your local bank and discuss the various mortgages available, and pick one that suits you best. Make sure you get pre-approved for the mortgage of your choice. This will save your time and cut short your effort, enabling you to look at houses that fall within your budget. Getting pre-approved gives you not only peace of mind but also an edge over other home-buyers.

2.Not checking your credit score.

Your credit score is of vital when applying for a mortgage loan. Don't walk into a bank without knowing your credit score, as a poor score can disqualify you from applying for loans. If you've got a low credit score, pay off old bills immediately. A good credit score enables you to choose among many different mortgage loans, allowing you to buy your dream house finally. You can always check your credit score with CCRIS and of course for those who are not entirely sure what is CCRIS, this handy guide tells you what you should know about CCRIS

3.Falling for 'Adjustable Rate' mortgages.

An adjustable rate mortgage offers you a low rate of interest for the first two to five years after taking out the loan. This typically allows you to buy a larger house than you'd normally qualify for, by paying a lower down payment. Although this seems like a homeowner's dream, the interest rate witnessed a sharp increase after the stipulated two to five month period. Borrowers of such loans often find themselves unable to refinance their existing loans, and slowly fall into debt.

4.Making verbal agreements with the mortgage broker.

Making verbal agreements regarding loans and mortgages will not end well for you. Make sure that everything you've discussed with your mortgage broker verbally, finds its place on a written agreement. Jot down the rate quotes, fees, prepayment penalties, and other key terms to avoid any surprises in the future.

5.Applying without Preparation.

If you do not prepare properly for making a mortgage application, you risk not only rejection. Your credit score will most likely sink. Furthermore, this rejection may have an adverse impact on all future applications that you make. This mistake may cut your access to financing for a very long time.

Given all this, you need to make every effort to ensure that you will get approved. Work on improving your credit score until it reaches 680. Pay all of your monthly bills fully and on time. This applies to the credit card ones as well. Avoid taking out other credit facilities and making major purchases before making the application.

6.Going for a No-Cost Deal.

It is natural for home buyers to be excited about the purchase of a house and with the opportunity to get a mortgage with no closing costs. However, the fact that you are not paying these costs now does not mean that they are incurred by the lender, the seller or someone else.

These costs are integrated into the home loan. They can be either add to the interest so that it becomes higher or added to the principle so that the total cost of the loan is greater. Either way, you will pay more eventually. For this reason, you should go for a traditional product and use your savings to cover the closing costs.

7.Choosing Interest-Only Program.

This is perhaps one of the biggest mortgage mistakes any person can make. It is great to have low monthly installments, but at one point you will have to make a large balloon payment. At this point, your primary option will be refinancing, but you may not be able to qualify for it since you will not have gained any equity in your properties due to the repayment of interest only. Hence the risk of foreclosure is time higher. Do not assume this risk for the sake of saving.

8.Not Calculating All Costs Involved.

If you fail to calculate all costs, you may end up with much higher monthly payments than originally expected. If you do not plan for the closing costs, they will be added to the loan and push its total cost further up. Given this, you have to calculate carefully all closing fees, mortgage insurance premiums and service fees that you will incur.

9.Not Making Down Payment.

If you do not make a down payment, you will have to pay a very high insurance premium. You may not qualify for refinancing in the future due to insufficient home equity. This can make the home loan repayment more difficult and much more expensive. The larger the down payment is, the cheaper the home loan will be.

10.Another common mistake that home buyers make is making a major purchase of some consumer item such as a car just before trying to qualify for their home mortgage. Mortgage lenders use a formula called the debt to income ratio to try to assess the home buyer's ability to pay for a particular mortgage in advance, and any consumer debt that you add simply reduces the amount of house that you can buy under their guidelines. So delay any major consumer purchases, especially those made on installment payments until after the mortgage papers are signed if possible.

Always chew to your ability. You should be keen to avoid all mortgage mistakes that might cost you in future. Be sure to understand the terms of your loan to avoid hidden expenses during your repayment. Your monthly earning is key when deciding the amount of loan to take.

You should only secure your loan from a trusted lender. Let the lender give you the references from their previous clients. They should be positive to give you a go-ahead. Having a good home is paramount but your property is of value however how little it could be. Do not take a loan that will risk what you already have. All the best as you prepare to buy a new home.

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TerenceMag said... 30/10/19 9:40 AM

Does the credit score rules apply to MM2H applicants too?