Unless you have a lot of cash from a previous sale, you'll need to complete the mortgage process when buying a home this spring. Here are three mistakes that should be avoided throughout the life of your loan:
1. Paying off your mortgage before other costly debts
Even though a mortgage is likely a person's largest debt, they probably have loans that cost them more in interest, such as credit card or auto loans. With that said, before deciding to pay off a mortgage early, other debts should be targeted, as homeowners will want to pay down the debt that is costing them the most in interest.
2. Opting for a 15-year mortgage without an adequate savings account
When applying for a mortgage, people generally choose either a 15- or 30-year term. The perks of a shorter loan include owning the home faster, and potentially getting a lower interest rate. However, this loan length shouldn't be utilized unless a person has financial security. For example, if they don't feel strong about their job security, it might be a better idea to go with a 30-year loan with more affordable payments, or simply wait to purchase a home. Taking on a 15-year loan without being able to afford the large payment could lead to a disaster.
3. Not considering the total housing payment
Mortgage payments consist of more than just the principal amount and the interest accrued, which is why many people may find their monthly payments are higher than expected after purchasing a home. Before taking out a mortgage, people need to be sure they understand everything that goes into the cost of a loan. In addition to the principal and interest, homeowners will pay taxes, homeowner's insurance and even private mortgage insurance in certain circumstances. Failing to factor in these costs could lead to an increased chance of foreclosure, as homeowners might not be able to afford the higher payment.
To receive a free quote, simply visit www.capwestmortgage.com/quote or call (866) 614-5959 to speak with a CapWest Mortgage representative today.