Getting a mortgage in Houston can be a long, complicated affair, so naturally home buyers appreciate all the help they can get to make the process a little easier. Many people who may or may not have knowledge or experience with mortgages will throw their advice into the hat with all the best intentions, but what worked for them might be completely wrong for you.
Before you risk losing your dream house over what a friend of a friend’s cousin did when they got their own mortgage, make sure you read this list of bad advice to the very end.
“You don’t really need to bother with getting pre-approved”
Why people say this: From their perspective, you haven’t even found the house you want, so why get ahead of yourself and bother with all that paperwork? Besides, getting pre-approved doesn’t even mean you’ll get a loan. You might as well wait for an underwriter to take a good look at your full application.
Why you shouldn’t listen: While they are right in saying that getting pre-approved isn’t final, it reduces the risk of running into problems later in the process. Getting pre-approval from a bank will help you avoid the heartbreak that comes from falling in love with a house you can’t buy. Pre-approval actually sets you apart if there is more than one offer on the house. Sellers feel more assured when they see that a prospective buyer has been evaluated buy a bank.
Start the process early to put yourself in the best position to receive the loan you want.
“Don’t apply for a mortgage at a bank you don’t have an account in”
Why people say this: They imagine that you will get better rates just because you’ve had an account with that bank for sometime. Surely, this will make the process much quicker.
Why you shouldn’t listen: Before you buy a house, you look at many different options to find the one that’s perfect for you. It’s no different with your mortgage. Experienced real estate attorneys will tell you that although your bank will promise a faster, easier process with them. In reality that isn’t always the case. Sometimes another bank might have more favorable rates for your situation. Always go with the place that gives you the best terms.
“Forget about the fine print, it’s not that important. It’s all about how much they’re giving you”
Why people say this: There’s so much paperwork involved. Are you really going to read through all of it? You probably won’t understand most of it. Everyone gets pretty much the same contract anyway. Just look at a few key figures and sign.
Why you shouldn’t listen: The fine print is where all the juice is! You are entering into a long term contract with a financial institution. If anything goes wrong, you risk losing your house. You definitely want to read every single word of the contract and highlight any parts you don’t fully understand. Many homeowners have discovered items that they had to dispute buried in the fine print of their contract. Yes, it might take you longer, but you will be sure nothing has gone over your head.
“Just go with whoever has the lowest interest rate”
Why people say this: If the interest rate is low, the monthly payments will be low. Duh…
Why you shouldn’t listen: This isn’t that straightforward. Your terms might include a lower interest rate, but often with adjustable-rate mortgage. You need to read the fine print to make sure the lower interest rate means what you think it does.
Adjustable-rate mortgages actually aren’t so bad in some situations. Mike Durr from Nations Reliable Lending near Houston advises that home buyers should be cautious when lenders push interest-only adjustable mortgages. It can put you in a bad position if rates increase later on.
Before, the value of homes was going up as interest rates came down. In that circumstance, adjustable-rate mortgages made sense for people–especially people who weren’t planning to extend the loan past its first term. Interest rates might seem low now, but they’re quite likely to go up soon so be extra careful.