A huge mistake with my first home and mortgage cost me $1,000s – you can avoid it with one simple move

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A homeowner shares a mistake he made with his first home and mortgage application that cost him thousands of dollars.

Matthew Frankel, a chartered financial planner, shares how you can avoid the same pitfalls if you are looking to take the plunge and apply for a home mortgage.

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Now a seasoned homeowner shares the big mistake he made while applying for his first mortgage that cost himcredit: getty

if you’ve ever been through mortgage The process, you know, can be mind-bogglingly time-consuming and incredibly stressful because of all the necessary documents.

Matthew learned the hard way that you need to do your homework before choosing a mortgage lender.

That’s because at the end of the day lenders are selling you a product – a loan.

they wrote The Motley Fool That it can pay to follow a simple tip – before deciding which lender to use.

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Why shopping around makes such a difference

Matthew said when he first bought one House He filled out a mortgage application with the person who was recommended by his real estate agent and accepted the first rate he was quoted.

He said it was a mistake.

Mortgage lenders don’t all offer the same rates — they differ.

If you get quotes for a 30-year fixed-rate mortgage from five different lenders, you’re likely to get five different rates.

Mathew said a small difference in rate can make a big difference in your payout.

Let’s say you’re buying a house for $400,000 and putting 20% ​​(or $80,000) down – you need to borrow $320,000.

Your real estate agent’s preferred lender offers you a rate of 5.125% on a 30-year loan, while another lender approves you for 5%.

The higher rate has $1,742 monthly principal and interest payments, while the lower rate has $1,718 payments.

But a 30-year loan has 360 monthly payments.

That’s a difference of $24 each month, which adds up to a total of $8,640 in additional interest over the term of the loan.

Will Multiple Mortgage Applications Hurt My Credit?

You may have heard that filling out too many applications for credit, and too many lenders pulling your credit file can hurt your credit score.

This is true, generally speaking, especially if you apply in rapid succession – that is, several week after week.

However, Mathew said there is a special discount designed specifically to allow consumers to shop around for the best interest rates on loans.

As long as all of your credit inquiries are made within the “normal purchase period,” which is defined as two weeks by most versions of the FICO credit scoring formula, they will only count as one credit application for scoring purposes.

So it pays to shop around.

make a short list

The best course of action as a home buyer is to make a short list of three to five mortgage lenders that meet your needs, he said.

He said Motley Fools top mortgage lender The page is a good place to start – and he recommends asking them all for a quote.

Mortgage rates are rising but they are still relatively low by historical standards.

So, if you want to take advantage of them before rates go up too high, you need to find a lender who can help you secure the best possible rate.

Pre-approval, once you decide on a shortlist, can be done in a matter of minutes with the right lender.

You should also consider whether the lender charges origination or lender fees, which can be as high as 2% of the loan amount for some lenders, Matthews said.

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