5 Common Mistakes in Getting a California Home Loan
If you're ready to buy a home in California, whether it's your first time or your fifth, chances are you need a California home loan. It's easy to find lenders, but it's also easy to make mistakes when looking for a loan. Here are some of the most common mistakes you want to avoid:
Not Understanding What You Can Truly Afford
If you don't know what size mortgage payment your income can truly handle, you are going to waste time looking at homes you can't afford. Worse, you might be in for a shock when you go in to get a loan.
How much can you afford? There are a number of online calculators to use, or you can talk with a homeownership coach to get a more personalized idea of your price range. In general, you shouldn't be spending more than about 28% of your gross monthly income on home costs. Payments on your total debts shouldn't be more than about 36%.
Not Correcting Credit Report Errors
Your credit report will go a long way to determining how much money a lender is willing to give you. Unfortunately, these reports sometimes contain errors that people don't bother to check up on. If you haven't checked on errors, you could have a lower credit score than you really deserve.
Making an adjustment could be something as simple as making sure your most recent credit card balance is the one being reflected in the report. Or, it could be something as serious as the bureau missing the fact that you paid off a student loan. Whatever it is, challenge it and get it right so your credit is as good as it can get.
Making a Down Payment That's Too Small
While you can get loans for less than a 20% down payment, if you can possibly afford 20% or more, pay it. The more you can put down in advance, the better your credit terms will be and the more loan options you'll have.
In most cases, it's smart to wait until you can put down a larger down payment, but there are occasional exceptions. Consider this scenario: you have a fixed monthly income that you know isn't going anywhere and a decent nest egg for emergencies but not enough for a 20% down payment. You can see that California home prices are set to rise. If those rising prices will price you out of the market in five years, you might want to jump early.
Not Listening to Sound Advice
Even if this isn't your first rodeo when it comes to California property, it's still a good idea to talk with a coach or loan pro to find out your options and get advice about the market, the best loans for your situation, and what you can afford.
Most of us won't buy that many homes in a lifetime, and the process is complicated. It's highly unlikely you have the expertise you need to make the best decision, and even older family members and friends who have gone through the process can only tell you what they experienced. Talk with a professional to get the best advice.
Changing Jobs Before Your Loan Closes
If you have the chance to get a better salary, naturally you want to take it. The problem is doing so when you're in the middle of the loan process. This can seriously complicate things and might even derail the process altogether.
The worst situation is if you are moving into self-employment. In most cases, lenders want to see a solid history of good financial practices out of a self-employed person before they'll even consider a loan. It doesn't matter what your income is: what matters is a five-year (or more) track record of doing well being your own boss.
Get Your California Home Loan
If you're ready to avoid the big mistakes and get the home loan you need, it's time to call Justin Purpero. Talk with an expert homeownership coach about what's right for you, get your questions answered, and get the California home loan you need to become a property owner.