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Avoid easy mistakes when signing mortgage

If you're a first-time homebuyer, there's a lot more to buying a home than just finding the right house. See tips.
October 10, 2013 12:00:00 AM PDT
As interest rates remain low, the housing market continues to be hot. Many of the buyers are first timers, but there's a lot more to buying a home than just finding the right house.

First-time homebuyer Evan Lamont of Long Beach has seen a lot of homes with his realtor, Anne Marie Reggie.

"It's been a long process of renting and kind of figured that we would be there already. But so far, we're just kind of trying to figure out what's the right property for us," said Lamont.

Besides taking his time to find the right house, Lamont says he's also been trying to learn about another side of buying a home: the mortgage.

"I consider myself a pretty smart guy and yet this process has been a bit overwhelming. I'm trying to learn everything from what's the right mortgage for us versus property values, interest rates," said Lamont.

Michelle Scott has 25 years of experience in the mortgage business and has her own company called Luxury Property Lending. She says first-time homebuyers often make mistakes before they find the home of their dreams.

"They'll get in the car with the realtor and look at a few homes before they get prequalified or preapproved. By the time they come see me and apply for the loan, they might not qualify for those homes that they were looking at," said Scott.

And getting preapproved is much different than getting prequalified.

"Preapproval process is when you actually get that written commitment to lend. The prequalifying is someone just taking a few numbers from you and giving you a letter. That's not a real approval," said Scott.

Another tip is to make sure your credit score is above 700 or you'll face thousands of extra dollars in upfront fees. Scott's tip to bring it up is to pay down your revolving balances to 25 percent of your available limit.

"So let's say you have $10,000 in total credit available. You need your balances to be at $2,500 or less," said Scott.

And that also means putting aside any big purchases, such as a car or major appliances.

"Right before close of escrow and the ratios are tight for a lender, they maybe go out and buy a new washer and dryer for the new house, and that's on their credit card, and then that just screwed up their ratios. And then we're scrambling before the deal closes, because now they don't qualify for the loan," said Reggie.

Lamont says he's ready and has even got his budget together before the big move.

"It's the American Dream. Everyone wants to own a home," said Lamont.


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