Buying a home is one of the most significant financial decisions you'll make in your lifetime and securing a mortgage is a crucial part of that process. Making common mortgage mistakes can cost you time, money, and even your dream home. In this blog, we discuss how to avoid the three most common mortgage mistakes so that you can get through the mortgage application process successfully.
Not getting pre-approved for a mortgage
Before you start looking for your dream home in Maine, getting pre-approved for a mortgage is essential. Mortgage pre-approval gives you a clear idea of how much you can afford to spend on a home and demonstrates to sellers that you are a serious buyer. Without pre-approval, you risk wasting time and money on homes that are out of your price range, and you may lose out on your dream home to a pre-approved buyer.
Not having enough for a downpayment
Another common mistake when applying for a mortgage is insufficient cash for a down payment. Many loan types require a downpayment of 20% to avoid paying private mortgage insurance (PMI). In Maine, the median sales price (MSP) for homes sold in January 2023 reached $325,000, an increase of 11.21 percent over January 2022.
Other loan options may be available if you don't have enough for a 20% down payment. MaineHousing offers some programs for first-time homebuyers and veterans, such as:
- First Home Loan Program
- Salute Home Again
Not knowing your credit score
Your credit score plays a significant role in the mortgage approval process. It's essential to know your credit score before applying for a mortgage. In Maine, the average credit score is around 715, and a score of 720 or higher is considered excellent. A lower credit score can lead to higher interest rates, a smaller loan amount, or even denial of your mortgage application.
But don’t panic! There are ways to increase your credit score if necessary. Applying for new credit cards or loans, or making significant purchases, can affect your credit score and debt-to-income ratio (DTI). In Maine, the average DTI is around 43%, so it's vital to keep your debt manageable and avoid taking on new debt before or during the mortgage process.
In conclusion, applying for a mortgage in Maine requires careful consideration and planning. By avoiding these three common mistakes, you can increase your chances of getting approved for a mortgage, save money in the long run, and confidently move into your dream home. If you have any questions about how to get pre-approved for a mortgage in Maine, our experienced mortgage team will help guide you through the entire process from start to finish. We’ll help you determine your financial strategy, mortgage amount, and purchase price. To schedule a free no-obligation consultation, contact KFS Mortgage Company today.
KFS Mortgage Company, Experience, Trust, Peace of Mind.
KFS Mortgage Company, 207-873-5153, www.kfshomeloan.com
NMLS #2097505, Maine NLC2312503, Equal Housing Lender