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TIP OF THE MONTH “Remember- the best mortgage rates usually go to the person with the best credit score or best borrower profile�

Avoid the Common Mistakes To limit the risks of over-paying for your mortgage, it is best to learn about and understanding the most common mortgage mistakes you can possibly make when deciding on a loan. You will have a higher chance of obtaining the best suitable deal for your needs. These are some of the most frequently made mistakes by first time home buyers on their mortgages and how to avoid them:

In This Month’s Issue Page 1: Avoid the Common Mistakes Page 2: Why Get Pre-

Not reviewing your personal credit

Approved One of the basic mistakes you can make is not review your personal credit before applying for a mortgage by submitting documents required for loan application. A huge number of people start looking around for a mortgage thinking that approval is a formality. You are just getting a feel for the market and the available deal that is available to you.

Page 3: Benefits of Home Ownership Outweigh the Risks

But you get a shock when lender decline your application one by one and you have no choice but to take up a loan with high interest rates. Before you go around shopping for a suitable mortgage, make sure you are promptly repaying your credit bills. Review your own credit report and check if the information is correct. When you spot mistakes, look for the lender that issued them and request for them to review for reporting to the credit bureau. Adverse records can really harm your chances of getting a good deal.

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Looking for a property without having pre-approval It might be surprising that a lot of people make the mistake of buying properties without having any idea on whether they are able to obtain a mortgage for it. Some even think that getting a mortgage is an entitlement! Pre-approval mortgages means that lenders actually conduct credit assessment and agrees to approve a certain loan quantum based on that assessment. This allows you to have a figure in mind on what kind of property you will be able to purchase. Playing with mortgage calculators at this point is jumping a gun when you have yet to get a concrete approval from a lender. Over-borrowing Another common mistake is borrowing too much. High leverage can put you under great financial stress over time. Try not to be tempted to take up 80% loan to value (LTV) when all you really need is 50% LTV. You will ultimately have to pay interest for the loans. So it would be wise to calculate just how much you can comfortably afford for your mortgage while maintaining your lifestyle. Buying more than you need With a lot of lenders, you might be tempted to sign up for additional related products as well. This include home and mortgage insurance. Although you might be able to get these items at huge discounts, only sign up for items that you really need. Insurance for example are recurring fees. These costs can add up to a significant number in the long term. Remember to read the facility letter from the lender carefully and ask questions when unsure.

Get Pre-Approved For Your Mortgage Your first step in buying a house should always be to secure a pre-approved loan. There are no guarantees in the world. You might have heard about that story about your friend or friend’s friend who lost his booking fee by buying first and finding out later that he cannot get a loan approval. Surely you would think that it cannot happen to you. Well those that had these unfortunate experiences didn’t think that it could happen to them as well. Another thing to think about is that home sellers may have preference over buyers who already have a loan in hand ready to make a deal. If a seller is considering between you and another buyer, who do you think is a safer bet for the seller? The one with a loan ready or one who has no idea whether he can get a loan?

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Benefits of Home Ownership Outweigh the Risks For people buying property for the very first time, it can be a nervous experience. You will either be following a quick guide to home buying or going in without a clue. Comparing between owning a home and renting one, ownership definitely has it’s benefits. However, if your plans are for the shorter term, renting may make sense for you. One reason why renter prefer renting to buying is that they do not have to go through the tiring process of buying a property. Unstable income may also be a big reason to defer buying. But if you are no special situations that make renting more advantageous, owning a home is a better choice over the long term. One of the biggest advantages in owning a property is equity. Equity refers to the value of the property. As you make consistent payments towards your mortgage, your equity in the property increases. Ans as the value of your home appreciates, so does your equity in it. This is why real estate is a great investment as properties tend to appreciate in value over time. Equity can be converted to cash through home equity loans or a line of credit. These are loans taken up using the home as collateral. Investors often use equity loan to release cash funds for other investments to make their money work harder for them. But bear in mind that your investments made using home equity loans have to generate returns greater than the interest you are paying to make logical sense. Let’s not forget that most home buyers initially have no intention of using properties as investment tools. They genuinely want a home they call their own. And that is the sole reason they are buying properties.

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Mortgage Newsletter 76