The financial aspect is one of the most important when it comes to buying a home, and applying for a mortgage is a huge step. However, pitfalls and mistakes when doing so aren’t discussed enough, causing some aspiring homeowners to go in blind and unknowingly make things harder for themselves. 

In this article, we’d like to shed light on some common mistakes to help people like you prepare for a mortgage’s huge commitment.

1. No Awareness of Credit Score

Having a good credit score is crucial when applying for a mortgage. Some banks use credit scores to determine how much money they can lend a borrower, as well as the interest rate. To avoid paying more for interest rates, it’s crucial to improve your credit score. 

One of the biggest mistakes you can make is applying for more credit when you don’t really need it. It may come in handy later on, but if you’re not careful and don’t pay the bills on time, your score may be affected.

2. Having Too Much Debt Beforehand

Getting a mortgage with too much debt is another common mistake. It may sound counterintuitive, especially if you think your income alone can cover the mortgage. However, as your debts grow, the risk of defaulting on your mortgage is increased as well. 

Having a good credit score is vital, but having a good credit score plus a low debt-to-income ratio is the safest way to approach financing a mortgage.

3. Not Exploring Options

The mortgage market is quite vast, and different loans may have different terms. Shop around to find the best deal out there, as you may be able to negotiate a better loan than you initially thought. 

Some things you should consider are the interest rate, the mortgage term, the maximum amount you can spend, and the down payment. Take your time and compare what you can get. This is a considerable commitment, after all.

4. Taking on Multiple Major Credit Decisions

Getting a mortgage is a huge commitment, but so is getting married, having a child, or buying a car. In fact, getting a car loan or applying for a credit card is a huge decision as well. 

Unfortunately, many people often make the common mistake of applying for multiple loans at the same time. This makes it challenging to track your payments and debt-to-income ratio and may put you in a tough spot financially if you cannot pay your bills on time.

5. Not Considering Additional Expenses

Another common mistake many don’t even realize they are making is not considering the additional expenses of a mortgage. It may be tempting to think, “A $500,000 mortgage will only cost me $500 a month for 30 years! That’s cheap!” However, other factors like home maintenance, repairs, and utilities can drive your expenses higher than you can handle.

Conclusion

A mortgage is a massive part of your finances, so do your homework first. Know the different options you have, the pros and cons of each, and the risks each entails. Having a good credit score is definitely a good start. Do your due diligence, and you can find yourself in a better financial situation and sleep better at night.

Let us help you finance your Ontario home! With the help of our award-winning mortgage brokerage, you’ll be confident about your investment and rest easy knowing that you’re being taken care of!