The Five Biggest Mistakes You Can Make When Obtaining a Loan

Posted by  on May 03, 2010

The money part of buying a house is often the most intimidating step. Because it is rare that anyone has all of the money needed to buy a home, it is also an essential part of the process. This is a step that can not be taken lightly as it will affect your financial history now and in the future. To help make sure you are getting off to a positive start with your home buying experience, here are five mistakes to avoid when you are obtaining that loan.

Mistake #1: Not Looking Around

Just as when you head out your door to find a house, you should not head to the first bank you see and get a loan there. You need to take some time to look around at the various lenders in your area, looking at their options and their agreements to see what appeals to you. You might want to see how different payment plans can help you in terms of working with your lifestyle or your career. Also, you want to see if there are any benefits to choosing one lender over another — and to do that, you need to look at more than one lending agency.

Mistake #2: Not Asking for a Lower Rate

Too often, borrowers think that interest rates are set in stone with the lender — but this is not the case. If you are looking to borrow money from a particular lender, you have the right and the duty to ask them if they can give you a lower rate. Often, you can choose a different kind of loan in order to get a lower rate for your mortgage or you can get offered something lower in order to gather your business. There are a number of comparison tools online that can help you compare the interest rates between lenders.

Mistake #3: Not Asking about the Terms

Without any malicious intent, many lenders do not outline all of the terms of their loans. This can lead to confusion when you go to pay off the loan. Be sure to have the bank or lending company clearly tell you what to expect in paying off the loan. If there's anything you do not understand, have them explain it to you until you do understand, and then you can sign the paperwork.

Mistake #4: Not Using a Lawyer

Not hiring a lawyer to look over the papers when obtaining a loan or reviewing the final closing papers is another potential mistake. A lawyer will be able to point out any areas that might not be clear and that might cause trouble in the future. Of course, the lawyer you choose will need to be experienced in looking over financial agreements, not just the closing documents.

Mistake #5: Not Checking Your Credit History

Before you even begin to obtain your loan, you may want to think about looking into your credit history. Because lenders are going to offer you credit scores that are in relation to your credit history, knowing how you rate can help you determine if they're offering you the best rate for your financial status. If not, you can move on to someone who will.

Also, when you are obtaining a loan, you need to make sure that you are absolutely sure you understand what you are getting into. The main problems that stem from foreclosures lie in the fact that the borrowers do not understand how the loan is going to work — and the loan becomes too expensive for them. Do not let this happen to you.


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