Have you just recently put an offer on a new home?
Are you in the process of shopping around for a lender?
Don’t Make Big Purchases
If you have to get a loan for a large purchase such as a $15,000 auto loan, it could prevent you from qualifying for the mortgage amount or rate you want—don’t do this before you request a mortgage loan.
Lenders do not look favorably upon adding debt upon debt.
Besides that, the more money you are spending on loans, the less you will have to put toward a mortgage.
Don’t Live Beyond Your Means
If you try to obtain a loan that would raise your payments from $500 in rent to a whopping $1600 per month principle/interest/insurance payment, then you are likely to experience what the industry calls “payment shock.”
You don’t want to live beyond your means.
A lender will look at this differential and you will find yourself in one of two situations: 1) you won’t qualify for the loan or 2) you will end up having to cover too much loan with too little money.
Don’t Get Pre-Qualified. Do Get Pre-Approved
When you are pre-qualified for a loan, you are basically given an estimate of how much of a loan you will qualify for after you’ve submitted income, credit and debt information.
In this case, the lender does not pull credit reports, check debt to income ratios and perform other underwriting steps.
But by getting pre-approved, these latter steps are performed and you are that much closer to obtaining a loan and locking in a rate and term.
The first is an estimate; the latter is much closer to the final product.
Don’t pay for Document Prep and Administration Fees
The origination fee should include these services, so don’t pay them!
Ask your lender to waive these fees.
Don’t Pay for Inflated Credit-Report and Courier Fees
Some lenders are charging up to $65 for pulling your credit report. That is unusually high, considering the fact that credit reporting bureaus only charge $6 to $18 per report.
Using the same tactics, some lenders charge courier fees for shipping your closing documents for as much as $100, while the majority of overnight express services only charge $22.
Tell your lender, up front, that you refuse to pay any more than the going rate for these services.
Don’t Pay for Padded Title Insurance Fees
When you are shopping for lenders, look for all the above, plus look out for those who don’t tack on a lot of extra charges for services such as title search and document preparation.
These can add hundreds of dollars to your closing costs and they really should be included in the price of title insurance, which depending on where you live, can be as high as $6,000.