The cliché “hindsight is 20/20” turns out to bepainfullytrue when it comes to mortgages. Between searchingfor a lender, securing the best rate, and being truly realistic about the amount that you can and should (not always the same thing!) finance to buy a home, mortgage shopping is a labyrinthof potential missteps. Even small oversightscan, over time, amount to thousands of dollars down the drain.
So learn from the missteps of these homeowners who look back and wish they’d done things differently. Because their regrettable blunderscan be your triumphant gains. Score!
Big banks aren’t always best
“My husband and I initially workedwith a big bank to buy our first home, thinking that a name we knew would guarantee us the best rate and customer service. But after weeks and weeks of going back and forth with the well-known bank, their rep was still hung up on how to correctly factor in my income, which came from a full-time contract job I’d had less than a year. Having to pass up home after home that we wanted because we didn’t have our financing set frankly sucked.
“So on the advice of our agent, we began working with a small local bank. Within days we were pre-approved and able to put an offer on a house. Looking back, we absolutely should have skipped the big banks for the little guys.” – Lynne Stevens, Portsmouth, NH
Lesson learned: Don’t blindlytrust a big-name bank for your mortgage. Also be sure to seekout local banks, especially if you have unusual financial circ*mstances. Community institutions are more familiar with the local market and offer the opportunity to meet face to face with decision-makers, giving you a chance to explain your situation. You may be able to get a better loan with more attentive service than at a national bank.
Act fast to secure a good rate
“I had no idea how quickly mortgage rates can change. When my wife and I were house hunting, we got a few brokers’ offers in and took a couple of days to decide which one we wanted to lock in. Trouble was, by the time we picked, the rate had gone up half a point. Had we acted faster, we could have saved about $60 a month.” – Tom Killilea, Andover, MA
Lesson learned: Lock in a great rate as soon as you can. Mortgage fees and rates change daily—sometimes even more than once a day.
Make extra payments if possible
“I wish I’d known that paying an extra payment every year to ‘principal only‘ would help shave up to six years off of our mortgage. Being a single-income family, we do everything possible to save for the future, and being mortgage-free six years sooner would have been amazing!As soon as we found out about how to make an extra payment last year, we started doing it. We are on our sixth year of a 30-year mortgage, though, so it would have been great to start this earlier.” – Veronica Vinieratos, Hicksville, NY
Lesson learned: If you can ante up a little extra now for a mortgage, it can add up to a lot of savings later. So if a windfall comes your way—through a tax refund, an inheritance, or even a great weekend in Vegas—put that money toward your principal.
Another way to save is to make biweekly mortgage payments, which up the frequency of your payments and reduce the interest you’ll owe.
Sometimes one mistake is one too many
“I missed my Kohl’s charge payment one time…and it turned up onmy credit report. This tiny slip, in turn, impacted my credit rating—and my ability to refinance my mortgage at a good interest rate. Now, the way I look at it, while you might be able to hide things from your spouse, you can’t hide them from your mortgage broker.” – Michelle Downs, Chelmsford, MA
Lesson learned:Always pay your credit card on time,especially when you’re about tomake major moves with your mortgage—even one late payment can drop your FICO score by 60 to 110 points and stay on your report for seven years. In addition to late payments, any changes to your credit behavior—like opening a new credit card orincreasing your balance—can affectyour score, sodon’t do anything out of the ordinary if you’re looking to apply for or refinance yourmortgage.
Don’t ever stop watching rates
“When we bought our home 39 years ago, the going rate was 10%. At some point, we refinanced to take some equity for the kids’ education and we felt lucky to get it down to 7%. But after that, we were so busy working and bringing up our kids that we never gave our mortgage a thought except to pay it every month. It wasn’t until our adult daughter, a Suze Orman devotee, convinced us to refinance two years ago that we considered changing things up. And boy, are we glad that we did. Our new fixed rate for a 15-year mortgage is 3.5%. I wish that we had done it years ago.” – Dorothy Gogan, Hopkinton, MA
Lesson learned: Though it may be a hassle and cost you thousands—in the form of fees from the bank, attorneys, an appraisal, and title insurance—refinancing your mortgage can mean serious savings for the long term.
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