| House hunting without getting pre-approved | | | | two years. Your income could be disqualified if you |
| Many home buyers confuse pre-approval with | | | | change jobs during the home loan application process. |
| pre-qualification. None of your information is verified | | | | Changing jobs within the same industry with little or |
| during the pre-qualification process (which usually | | | | no downtime (30 days or less) is acceptable to most |
| amounts to just a phone call between you and your | | | | lenders. But remember that changing careers during |
| mortgage broker). During the pre-approval process, | | | | the loan process could jeopardize your loan. Before |
| your financial information is verified, your credit is | | | | you take a new job offer, talk to your mortgage |
| pulled, and your application is reviewed by a lender. | | | | broker to determine if the change could upset the |
| Many home buyers go house hunting in the $300,000 | | | | home loan process. |
| price range only to find out later that they are only | | | | Buying things on credit during the mortgage |
| qualified for $250,000. Pre-approval allows home | | | | application process |
| buyers to shop with confidence. Sellers' real estate | | | | Do not take out new credit during the home loan |
| agents are also skeptical when it comes to offers | | | | process even if you are already pre-approved. |
| from buyers who are not pre-approved. | | | | Remember that lenders can pull the plug on a loan |
| Understandably, they don't want to take the house | | | | anytime prior to the time that the funds are |
| off the market only to have the deal fall through | | | | disbursed. Buying a new TV on a payment plan, |
| when the buyer is unable to qualify for financing. If | | | | leasing a new car, or charging furniture before closing |
| you want the seller to take your offer seriously, get | | | | could jeopardize your loan. Opening up new lines of |
| pre-approved and submit your pre-approval letter | | | | credit or increasing balances on existing lines of credit |
| with your offer. This one tactic could give you the | | | | is harmful to your credit score. To be on the safe |
| edge when it comes to competing offers. | | | | side, do not make changes to your credit profile until |
| Failure to buy owner's title insurance | | | | after closing. |
| Title insurance provides protection if it is later | | | | Choosing the Good Faith Estimate with the lowest |
| discovered that the title is imperfect. If a title dispute | | | | "Total Settlement Charges" |
| does arise, a homeowner who has a title insurance | | | | The GFE is a one page document that provides an |
| policy is protected. Borrowers are required by lenders | | | | estimate of all charges likely to be incurred at closing. |
| to purchase title insurance that benefits the lender | | | | The mistake that most borrowers make is that they |
| (to cover the loan amount), but it's up to the | | | | fail to look at the individual numbers and go straight |
| borrower whether or not to purchase owner's title | | | | to the "Total Estimated Settlement Charges," which |
| insurance. Owner's title insurance protects the | | | | is located near the bottom of the GFE. Most of the |
| homeowner's equity in the home. If a title dispute | | | | charges on the GFE are out of the mortgage |
| arises and a homeowner is without title insurance, it | | | | broker's control. These include items such as title |
| can get really ugly. Some homeowners lose all equity | | | | insurance, tax stamps, pest inspection, hazard |
| in the home, the home itself and last but not | | | | insurance, and mortgage insurance as well as prepaid |
| least-they are still on the hook for the balance of the | | | | taxes and insurance. One common mortgage broker |
| loan! Unfortunately, some borrowers wind up paying | | | | trick is to underestimate these charges to make the |
| a mortgage on a home that they no longer own | | | | total settlement charges number look more |
| because they failed to purchase owner's title | | | | attractive. When comparing mortgage brokers, |
| insurance. The good news is that owner's title | | | | disregard sections 1100, 1200, 1300, 900 and 1000 of |
| insurance is relatively cheap ($200 is in the ballpark), | | | | the GFE. The charges in these sections are out of |
| and it is only paid once at closing. | | | | your mortgage broker's control. Instead, focus on |
| Failure to review the closing documents prior to | | | | section 800 where the true differences in pricing are |
| closing | | | | likely to be seen. |
| Borrowers have to sign a stack of documents at | | | | Too-short lock period |
| closing, and many borrowers are so overwhelmed | | | | If your lock expires, you will be charged either the |
| that they just sign whatever is put in front of them. | | | | current market rate or the original lock-in rate, |
| Unfortunately, many borrowers are shocked at the | | | | whichever is higher. This is standard policy with |
| closing table when they discover that the mortgage | | | | lenders. Make sure that your lock period allows |
| terms in the closing documents are not the terms | | | | sufficient time to close. |
| that they originally agreed to. The best thing to do is | | | | Failure to do a final walkthrough of the home |
| to ask to receive the documents prior to closing. This | | | | Prior to closing you and your real estate agent (if |
| can be arranged through your title company, and you | | | | you are working with one) should do a final |
| can review the documents in the comfort of your | | | | walkthrough of the property. Take pictures of the |
| own home a few days before the actual closing. | | | | home at the time that you sign the purchase |
| Not knowing your credit score | | | | agreement. Bring these pictures with you when you |
| Most borrowers do not know their credit score, and | | | | do the walkthrough. These pictures are proof of |
| some get taken advantage of by unscrupulous | | | | what was inside the home. Sellers are notorious for |
| mortgage brokers. Now that the mortgage bubble | | | | swapping expensive appliances and fixtures with |
| has popped, we now know that many borrowers | | | | cheap replacements, doing damage to the home |
| who were put in sub-prime loans (for people with | | | | when they move out, and failing to complete repairs |
| not-so-good credit) were actually qualified for | | | | stated in the contract. To make sure everything is as |
| standard loans. However, these unwitting borrowers | | | | it should be, do a final walkthrough so that any |
| were placed in these sub-prime loans because these | | | | grievances can be addressed prior to closing. |
| loans generated higher fees to mortgage companies | | | | Coming to closing with no money |
| and lenders. You can check your FICO score at and | | | | Some borrowers forget to bring a check to the |
| then you will know where you stand before you go | | | | closing table, and their closings are unnecessarily |
| mortgage shopping. | | | | delayed. Remember that a personal check will not do. |
| Changing jobs | | | | Bring a cashier's check to closing; otherwise your |
| Lenders seek to verify employment for the previous | | | | closing will be delayed. |