10 Mistakes Borrowers Make

I don’t think that the idea of the 10-best list started with Johnny Carson, but he might have perfected it. Of course, a list doesn’t have to stop with ten. I was thinking about the well-deserved popularity of Gary Eldred’s wonderful book The 106 Common Mistakes Homebuyers Make (and How to Avoid Them), which, by the way, I commend to you.

There is some merit in these short capsules of wisdom. If you can’t remember them, at least you can carry them around on one piece of paper. I don’t want to cover 106 similar mistakes in borrowing, but I thought it would make sense to talk about ten of the more important ones.

1. Not getting professional help – The mortgage business is complicated, just like the field you are in. A mortgage expert can help you.

2. Not getting an education –There are a number of good books about mortgages, including mine. They can help you better understand the vocabulary, the process, and the choices.

3. Choosing a lender based upon rate quotes – Lenders are not sanctioned for lying so our industry has attracted many liars. By getting quotes all you are doing is finding the biggest one.

4. Not getting a lender’s references and/or not checking them – This is so easy but many people too feel embarrassed to ask for them, to their peril.

5. Not getting your credit cleaned up – We have been telling people how important this is for years, but they keep ignoring us. Inaccuracies on your report can cost you a bundle!

6. Starting out without setting goals – Many people start the process at the wrong end. Goal-setting is step number one.

7. Getting the wrong loan – Unless you do step 6 first, you will probably get a great deal on the wrong loan.

8. Buying too much rate protection – Many people buy 30 years of expensive rate protection when they really don’t need it.

9. Not paying points when it is to your advantage to do so – The best money saving opportunity is buying down the rate, typically a 25 percent return on investment.

10. Not asking for lender’s lock confirmation and getting escrow to prepare an estimated closing statement when rate is locked in – The reason people are surprised at the closing table is that they don’t take this important step.

I could go on, but avoid these pitfalls and you’ll be delighted at how well the process turns out.

Be careful out there.