Bad Mortgage Advice

Buying a home is likely the largest financial decision you’ll ever make in your life, and the biggest part of that is securing a mortgage. There’s no one way to get a mortgage and, unfortunately, there’s a lot of bad advice out there. Here are some common pitfalls to look out for when seeking a mortgage, and alternative solutions to commonly held myths!

“Don’t Get Pre-Approved.” 

If you’re just getting started shopping for a new home, you may think that getting pre-approved for a mortgage is jumping the gun a little bit. However, oftentimes an agent or broker won’t even show a house to someone who isn’t pre-approved. Granted, a pre-approval isn’t ironclad by any means but what it shows to the sellers is that if they were to go ahead and accept your offer, that the wheels would get moving. A seller is less inclined to accept an offer from someone without pre-approval since there’s no guarantee that they’ll be approved at all. Additionally, we don’t want anyone falling in love with a home they can’t afford. Better to go into the process knowing what your budget is!

“Get a Mortgage From Your Home Bank.” 

We understand the logic behind this… using the institution where you normally do all your banking makes sense, right? After all, they know you, they know your financial history, and it’s convenient. Not necessarily! When shopping for a home, also ALWAYS shop for a lender. Your hometown bank isn’t guaranteed to provide you with the best rate simply because you already bank there. No matter what, always shop around for the most favorable terms. 

“Borrow to the Max!” 

So you’ve been approved to borrow on a mortgage up to $450,000… which means you should shop for homes that cost $450,000, right? Just because you can doesn’t mean you should. Even if a bank agrees that you can absolutely afford that amount, it’s always better to shop slightly under your means. You never know what curveball life might throw you and so padding your budget to make sure there’s monthly excess is always a good thing. Even though some people can qualify for mortgages equaling half of their monthly income these days, that doesn’t mean you should go with the most expensive option. Consider setting a budget of a third of your income and stick to it!