Common Mortgage Mistakes That Cost Thousands (And How to Avoid Them)

Mistake #1: Not Shopping for Rates

The Trap: You get a recommendation for a lender from your realtor and just go with them. The Cost: Mortgage rates can vary by 0.5% or more between lenders. On a $400,000 loan, a 0.5% difference costs you $40,000+ in interest over 30 years. The Fix: Get Loan Estimates from at least 3 lenders.

Mistake #2: Ignoring the "Back-End" Ratio

The Trap: You focus only on the mortgage payment and forget about your student loans and car payments. The Cost: You qualify for the house, but you have $0 left over each month for fun or emergencies. The Fix: Use the 28/36 rule. Ensure your total debt payments don't exceed 36% of your gross income.

Mistake #3: Draining Your Savings for the Down Payment

The Trap: You put every last cent into the down payment to reach 20% and avoid PMI. The Cost: The day you move in, the water heater breaks. You have no cash, so you put it on a credit card at 22% interest. The Fix: It is better to pay PMI for a few years than to have $0 in emergency savings. Keep a 3-6 month cash buffer.

Mistake #4: Making Big Purchases Before Closing

The Trap: You are excited about the new house, so you buy furniture on credit a week before closing. The Cost: The lender runs a final credit check. They see new debt. Your Debt-to-Income ratio changes. Your loan is denied. The Fix: Do not buy anything on credit until the keys are in your hand.

Mistake #5: Forgetting About Maintenance

The Trap: You rent an apartment where the landlord fixes everything. You buy a house assuming costs are fixed. The Cost: Home maintenance averages 1-2% of the home's value per year. On a $400k house, that is $4,000-$8,000 a year. The Fix: Open a separate "House Repair" savings account and contribute to it monthly, just like a bill.

Summary

A mortgage is the biggest financial product you will ever buy. Treat it with respect, do the math yourself, and don't rely solely on the bank to tell you what is safe.

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