by:  JR Hevron - MortgageLoan.com

Five common mistakes that people make during the mortgage process

It’s no secret: looking for your dream home is a lot more fun than applying for a mortgage. The thing is, unless your mortgage is firmly squared away before you start house hunting, you may not get the house you want. You won’t know exactly what you can afford, and you won’t be competitive with other prospective buyers who can close the deal quickly.

Here are five common mistakes that people make during the process of getting a mortgage. These mistakes can cost you money and make it harder to get the right mortgage for you. And they can make the process take a lot longer, which can cost you the house that you want.

Mistake #1: Not being on top of your finances ahead of time

Long before you even think about buying a house or getting a mortgage, make sure that your finances in order. Here are a few things that you should do now:

• Do a credit check on yourself at least six months in advance. This will give you time to tend to any problems that show up and hopefully fix your score. A lower score means a higher interest rate.
• Don’t make any large purchases (like a car or a boat) or switch jobs before after you have applied for your loan and your loan is funded. These kinds of activities can lower your debt-to-lending ratio and make it harder to get a loan.
• Always pay your bills on time. Late payments can hurt your rating.
• Let your loan broker know about any past financial difficulty. If they know about your situation ahead of time, they can likely help you to work around it.

Mistake #2: Not getting pre-approved for a mortgage before looking for a house.

Getting pre-approved for a mortgage not only gives you a better idea of what you can actually afford, but it puts you in much better a better position for getting the home that you want.

Getting pre-approved means that you have already chosen a lender, filled out the paperwork, submitted it, and have received a pre-approval certificate. For the seller, it means that you should be able to close quickly on a home and that might make you a better match for them.

Take note: getting pre-qualified is not the same thing as getting pre-approved. Getting pre-qualified means that the lender has informally reviewed your assets, funds, and debts to find out the range of mortgages you might qualify for. A pre-approval is more of a commitment from the lender for the loan.

Mistake #3: Not shopping around for loan brokers

For those who feel stressed out by the process, it’s easy to go with the first broker that you find.

 In the case of a bad broker, this can ultimately lead to even more stress. Make sure that you are working with a loan broker who understands the process and is willing to take the time to explain the terms to you in easy to understand ways. Also, ask your broker for his or her performance guarantee: a sale can easily be stopped by a mortgage not going through.

 Mistake #4: Not factoring in expenses beyond your mortgage payments

When you are figuring out your monthly expenses, your mortgage payment isn’t everything. It’s easy to end up with a mortgage that you can’t afford if you don’t factor in property taxes, homeowners insurance, HOA fees, potential higher utilities, maintenance, and repairs.

 A smart idea is to limit you total payments to something reasonable like 25%.

 Mistake #5: Not factoring in closing costs

When you close on your loan, you should have enough money on hand to cover closing fees. These fees can total as much as to 2% to 5% of the total price of the house. These costs include expenses for things like escrow fees, property taxes, title, insurance, interest adjustments, appraisal fees, various loan fees, and home inspections and more.

To get an idea what these fees will be, make sure to get a Good Faith Estimate from the lender. They should be able to provide this to you within three to seven business days of applying for the loan.

You should also have money on hand for after the sale to take care of unexpected moving expenses or emergency home repairs like a broken water heater.

Do yourself a favor and educate yourself online or with a basic book. When it comes to getting your dream home, the time spent will be more than worth it.

Note:  How to get your REAL FREE CREDIT REPOR - www.annualcreditreport.com

 Improve Your Credit Score

 1. Get copies of your credit report--then make sure information is correct.

Go to www.annualcreditreport.com.  This is the only authorized online source for a free credit report. Under federal law, you can get a free report from each of the three national credit reporting companies once every twelve months.  Do this before you apply for a home loan.   It is best to check your credit about six months before you are going to start looking for a new house.  Review your credit report carefully and check for problems that you can correct.

You can also call 877-322-8228 or complete the Annual Credit Report Request Form and mail it to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.

2. Pay your bills on time.

One of the most important things you can do to improve your credit score is to pay your bills by the due date. You can set up automatic payments from your bank account to help you pay on time, but be sure you have enough money in your account to avoid any overdraft  fees.

3. Understand how your credit score is determined.

Your credit score is usually based on the answers to these questions:

1. Do you pay your bills on time? The answer to this question is very important. If you have paid bills late, have had an account referred to a collection agency, or have ever declared bankruptcy, this history will show up in your credit report.
2. What is your outstanding debt? Many scoring models compare the amount of debt you have and your credit limits. If the amount you owe is close to your credit limit, it is likely to have a negative effect on your score.
3. How long is your credit history? A short credit history may have a negative effect on your score, but a short history can be offset by other factors, such as timely payments and low balances.
4. Have you applied for new credit recently? If you have applied for too many new accounts recently, that may negatively affect your score. However, if you request a copy of your own credit report, or if creditors are monitoring your account or looking at credit reports to make prescreened credit offers, these inquiries about your credit history are not counted as applications for credit.
5. How many and what types of credit accounts do you have? Many credit-scoring models consider the number and type of credit accounts you have. A mix of installment loans and credit cards may improve your score. However, too many finance company accounts or credit cards might hurt your score.

4. Learn the legal steps to take to improve your credit report.

The Federal Trade Commission's “Building a Better Credit Report” has information on correcting errors in your credit report, and tips on dealing with debt and avoiding scams.

5. Pay Down Some of Your Credit Cards

If all or almost all of your credit cards are maxed out or nearly maxed out, it is time to plan an aggressive strategy for paying some of them down. One of the critical factors that often determine your ability to get approved for a mortgage loan is your debt to income ratio. In addition, high credit card balances can pull down your credit score. So it is important to look at paying off some of those balances.  It’s usually best to begin with your highest-rate balances first.

Beware of credit-repair scams.

Sometimes doing it yourself is the best way to repair your credit. The Federal Trade Commission's "Credit Repair: How to Help Yourself" explains how you can improve your credit score and lists legitimate resources for low-cost or no-cost help.

How to get your real FICO scores - go to www.myFICO.com