By Matt Allen
Vice President, Portfolio Lending (NMLS #415037)

7 Home Mortgage Loan Mistakes

Jan 29, 2019

  • Home Loans

Buying a house is one of the most important decisions you will make in your lifetime. Most people need to secure a mortgage loan to buy a house, and if not done correctly you can encounter unexpected financial consequences. Here’s some of the most common mistakes home buyers make when seeking a mortgage, and how you can avoid them.

  1. Not shopping different lenders.  You’re only hurting yourself if you don’t shop around for the best rate you can get. One-half of a percentage point can amount to a lot of money over time. The difference between a 4.5 percent and a 4 percent interest rate on a $200,000, fixed-rate, 30-year mortgage is $59 less per month. And make sure you factor in closing and mortgage insurance costs to the final tally.
  2. Not reviewing your credit score ahead of time.  A credit score will indicate to lenders what your rate will be, or in some cases whether they will grant you a loan at all. By looking at your score before the loan process, you can head off any red flags and take steps to correct any credit problems you may have that are solvable. Go to to get an accurate credit score.
  3. Not getting pre-qualified or pre-approved.  By getting pre-qualified, you can get an idea of what kind of home you can afford, and what your monthly payments might be. And, if you go through the pre-approval process, you can get a more accurate picture of how much a bank will lend you and streamline the loan process with a shorter contract period.
  4. Committing too much income for housing costs.  Determining how much you can afford for a house payment means taking other expenses you may incur over the life of the loan into account as well. Will your kids be going to college? Will you need a new car at some point? A good rule of thumb is figuring 28 percent of your pre-tax income to determine how much your monthly mortgage payments should be. For instance, if you make $80,000 per year, you shouldn’t devote more than $1,866 per month to a house payment.
  5. Not completing the mortgage application completely. Whether it’s intentional or not, leaving financial liabilities off your mortgage application can create problems, including getting rejected or not being able to make payments. Some of the most common items left off are alimony payments or deferred student loans.
  6. Not needing to put as much money down.  Many buyers are scared by the prospect of having to put down 20 percent for a loan payment. The truth is, there are many loan options requiring less than 20 percent and some no down payment at all. An FHA loan allows a down payment of 3.5 percent in all U.S. markets, and HomeReady™ loans through Fannie Mae require only a 3 percent down payment. Typically, VA loans need no down payment for qualified applicants. Another option is a piggyback loan, which allows a borrower to take out two loans simultaneously, one for 80 percent of the home’s value, and the other for an additional percentage of the home’s value with the borrower contributing the remaining percentage of the home’s value with their own funds.
  7. Not getting a VA loan if you qualify.  Every year there are thousands of veterans and active-duty military, including the National Guard and reserve units, who get conventional home mortgage loans when they could qualify for a VA loan. VA loans typically have lower interest rates than conventional mortgages and allow for higher debt-to-income ratios and lower credit scores. In a 2014 survey of 2,000 members of the Iraq and Afghanistan Veterans of America association, only 36 percent said they applied for a VA loan.

Buying a house is a stressful enough undertaking. Take the time to review these mistakes before looking into a home mortgage loan, and you could save yourself some money, time and headaches. For more help on the right way to secure a home loan, contact the mortgage experts at NASB at 855-465-0753 or click here for a free rate quote.