7 Mistakes all borrowers make

What is it costing you to continue to rent? Wealth is created through real estate, not renting.

Not figuring out how much you can afford?

Without knowing how much house you can afford, you might waste time. You could end up looking at houses that you can’t afford yet or visiting homes below your optimal price level. For many first-time buyers, the goal is to buy a house and get a loan with a comfortable monthly payment that won’t keep them up at night.

How to avoid this mistake: Use our mortgage affordability calculator to help you determine what price range is affordable, what’s a stretch, and what’s aggressive. Better yet, call AZ Financial at 480-787-5777, and they will do all the hard work for you. 

What does not fixing your credit report cost? You start paying more on auto loans, homeowners insurance, auto insurance, credit card interest, installment loans, basically for everything right? 

Not checking your credit reports and correcting errors - Most buyers immediately want to do this, which is wrong! Contacting an old collection or trying to settle it in full on your own is a mistake. Once you contact them, credit bureaus like Trans Union, Equifax, & Experian will trigger an adverse update that will lower your credit score. In this type of scenario, leave it to the experts and call  AZ Financial so we can guide you in the right direction so you do not delay the buying process. 

What does being in the wrong program cost you over 30 years? Hundreds of Thousands of people have gone into foreclosure, short sale, or bankruptcy because they were put into the wrong loan.

Ignoring VA, USDA, and FHA loan programs. Many first-time home buyers want to or need to make small down payments, but they don’t always know the details of government programs that make it easy to buy a home with zero or little down.

What happens when you go to a lender and are lied to? They say you weren't charged points and call it origination or discount instead. I can give you a whole book full of this kind of bait-and-switch. 

Not knowing whether to pay discount points.   

Mortgage discount points are fees you pay upfront to reduce your mortgage interest rate. Interest rate savings can add up to a lot of money over the life of a mortgage, and discount points are one way to gain those rate savings if you’re in the right position to purchase them.

How to avoid this mistake: If making a minimal down payment is an accomplishment, the choice is simple: Don’t buy discount points. If you have enough cash on hand, the value of buying points depends on whether you plan to live in the home longer than the “break-even period.” That’s the time it takes for the upfront cost to be exceeded by the monthly savings you get from a lower interest rate.

What does it cost to take time off of work shopping for lenders?

Shopping for a mortgage is NOT like shopping for a car or any other expensive item: This is a 30-year commitment. Usually, it is the single largest and longest type of financing anyone does in their lifetime. Mortgage interest rates vary from lender to lender, as do fees such as closing costs and discount points.

How to avoid this mistake: AZF typically does not Charge Points or Fees unless you request to buy down the interest rate. Apply with a lender referred to you by friends or family, or work with someone you trust. 

What would a mistake cost you if you didn't close on time due to a weak bank or credit union? You may lose your earnest money deposit, your interest rate might expire, or you might be in a different market with higher interest rates.

Applying for credit before the sale is final. One day, you apply for a mortgage. A few weeks later, you close or finalize the loan and get the keys to the house. The period between is critical: You want to leave your credit alone as much as possible. It's a mistake to get a new credit card, buy furniture or appliances on credit, or take out an auto loan before the mortgage closes.

Here's why: The lender's mortgage decision is based on your credit score and debt-to-income ratio, the percentage of your income that goes toward monthly debt payments. Applying for credit can reduce your credit score by a few points. Getting a new loan or increasing your monthly debt payments will increase your debt-to-income ratio. Neither of those is good from the mortgage lender's perspective.

Wait until after closing to open new credit accounts or charge big expenses to your credit cards. Within about a week of the closing, the lender will check your credit one last time. If your credit score has fallen or your debt-to-income ratio has gone up, the lender might change the interest rate or fees on the mortgage. This could cause a delay in your closing or even result in a canceled mortgage.

How to avoid this mistake: Wait until after closing to open new credit accounts or to charge furniture, appliances, or tools to your credit cards. It's OK to have all those things picked out ahead of time; just don't buy them on credit until after you have the keys in hand.