The house you choose has the power to shape your life. As you house-hunt, you’ll want to make your list of must-have features, like the right number of bedrooms and baths, along with space for your passion projects so you can garden and barbecue to your heart's content.

Equally important to finding a house with the right features is putting in financial due diligence. As one of your largest monthly expenses, your mortgage payment should leave enough cash cushion so you can plan for the future and enjoy today.

Before you make an offer, be aware of these mortgage mistakes and how to avoid them.

Mortgage mistake #1: Not factoring in the total costs of homeownership

When trading up from apartment to house (or starter home to larger home), you’ll want to make sure your finances can accommodate the mortgage and interest payment along with the costs of owning a home.

Your house payment includes

Typical monthly expenses for homeowners

  • Utilities
  • Garbage and recycling
  • Homeowner association fees
  • Supplies for cleaning, maintenance and yard care

Ongoing and occasional homeowner costs

  • Home maintenance and repairs
  • Professional services and contractors
  • New appliances and furniture
  • Upgrades and renovations

Plan your budget accordingly to cover the monthly costs, including a monthly transfer into savings so you can plan ahead for emergencies and big ticket items.

Mortgage mistake #2: Taking on too much debt load

When searching for a new home, it's important not to rely solely on the amount you were pre-qualified for to determine affordability.

Just because you qualify, it doesn’t mean you can afford the monthly payment.

In reality, the figure in your pre-qualification letter is based on an analysis of your overall debt, income and credit score. What it does not consider are your monthly expenses, like child care and HOA fees, and how much you’d like to set aside in savings.

To make sure you’re targeting homes within your price range, figure out how much home you can afford with our online calculator, based on the monthly payment.

Mortgage mistake #3: Getting a car loan right before you buy your house

Taking out an auto loan six months before taking out a mortgage can be a costly mistake that shows up in your monthly house payment. So would opening a new credit card and running up a balance. The credit inquiry and loan balance will show up on your credit report and possibly lower your score, which could impact which interest rate you qualify for.

This is pretty critical, because over the life of a 30-year-loan, half a percentage point can cost you tens of thousands of dollars.

Guard your credit score by practicing your best credit hygiene during the months leading up to your home purchase. That means on-time monthly payments, paying down the balance, keeping the credit card at home and holding off on buying the new car.

[Read more: How can I improve my credit score?]

Mortgage mistake #4: Taking a 15-year loan

There are celebrity financial gurus out there who insist that a 15- or 20-year mortgage is the only true path to financial freedom.

Yes, you’ll save a bundle on interest by paying it off early. But that doesn’t mean it’s a good idea to commit to a shorter loan term, even with the allure of the lower interest rate. You'll be locked in to a higher payment that you must make every month, on time. That can lead to serious financial headaches if you ever faced a financial hardship, such as a prolonged job loss or medical crisis.

If you’re motivated to pay off your house early, extra payments on a 30-year loan will help you achieve your goals, while leaving you enough cushion during the difficult times.

Mortgage mistake #5: Failing to research lenders

Your choice of lender can have a large financial impact in the long run, especially if you end up with a lender who takes a transactional approach to your loan. Which means you may not always get great terms or the level of service you need when you're in a sticky situation.

[Read more: Why your local lender is a better bet than an online lender]

Choose Minnwest Bank as your mortgage lender, and our team will be in your corner. We take time to get to know you, your family and your financial goals, so we can provide the mortgage options and expert guidance that help you achieve your dream of owning a home. And through the life of the loan, help is always a phone call or visit away.

Learn more about our mortgage program and reach out to a mortgage banker in your community today.


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