8 NJ Real Estate Mortgage Mistakes to Avoid

How to avoid making costly errors when it comes to your NJ real estate mortgage

 

Getting an NJ real estate mortgage in this market is no simple task. It is a difficult and time-consuming process of what could possibly one of the most significant events of a potential homeowner’s life, financially speaking.

Below are 10 potential mistakes to avoid.

Not Reading Your Loan Documents

It is the responsibility of the NJ real estate homeowner to read and accept the terms of their new loan. Although this might seem like a daunting task when considering all of the paperwork involved, you will save yourself time and money in the end by knowing exactly what you are getting into from the beginning. Do not be afraid to question anything you might not understand or you can end up with a mortgage with predatory terms and no other alternative.

Not Checking Your Credit

Before you shop for a mortgage, you should know what your credit score is because a bad credit score can raise your interest rate several percentage points or you can be denied for a loan.

Not Understanding the Total Payment Involved

A mortgage payment includes principal, interest, taxes and insurance, or PITI. Prospective homebuyers often forget to factor their property taxes and insurance premium into their overall mortgage budget. The debt-to-income ratio, used to determine if a borrower can make a certain mortgage payment, is the proposed cost of PITI divided by gross monthly income.

Not Obtaining a Pre-Approval

Good preparation is the key to a good mortgage. Prior to shopping for an NJ real estate home, it is a good idea to contact a lender to get a pre-approval. A mortgage pre-approval involves the bank pulling your credit and taking your income, assets and employment into consideration. Your debt-to-income ratio will also play the part of ensuring how much you can afford. With this pre-approval, you will also get a written commitment from the lender that will show home sellers that you are serious about purchasing NJ real estate.

Not Shopping Around

Just because you are pre-approved with one bank does not mean you are bound to obtain financing from it. Shop around with multiple banks and lenders and consider a mortgage broker to shop your rate and find you the lowest rate with the best terms. It is smart to comparison shop similar to buying anything else for yourself.

Applying for New Credit When Applying for a Loan

Avoid applying for any other type of credit before and during the mortgage application process. The reason for this is because whenever you apply for new credit, you are considered a greater credit risk. If you apply for a credit card or other loan while simultaneously applying for a mortgage, your credit score might get negatively impacted enough to get you denied for the loan.

Not Seasoning Your Assets

The bank or lender will want to see that you can physically pay your NJ real estate mortgage each month, but if you lack seasoned money, or money that has been in a bank account for a few months, you could be denied. Some borrowers think they can transfer funds from a relative's account shortly before applying, but this does not work when the underwriter uncovers the paper trail.

Not Locking Your Rate

A mortgage rate means merely nothing when it is not locked in. When you receive a rate that you are happy with, the best thing to do is lock it in. Mortgage rates change daily, and quotes are just quotes until you tell the bank, lender or broker to lock your rate. Once this is done, your rate is guaranteed for a certain period, and you should never assume your rate is locked until you receive such in writing.

 

The real estate market is changing rapidly and expanding into new avenues almost daily. Sometimes it can be very difficult to find the answers you need on a specific topic or issue. In times like these, you need a real estate professional who will provide valuable information and trustworthy advice. For more information on NJ real estate, call us today or click here to be connected with one of our top real estate specialists.