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It’s a trap you don’t want to fall into.
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These days, signing a mortgage means taking on a really big financial commitment. Home values are still elevated on a national level, and mortgage rates are the highest they’ve been in decades. And so chances are, if you’re taking out a mortgage, you’re committing yourself to a fairly large series of monthly payments.
That’s why it’s so important to choose the right mortgage lender. But if these three signs apply to you, perhaps you’re about to make a giant mistake.
1. You’re looking at really high closing costs
It’s common practice for mortgage lenders to impose closing costs in the course of finalizing a home loan. Those fees run the gamut from application fees to title insurance fees to recording fees.
Generally speaking, you should expect the closing costs on your mortgage to equal 2% to 5% of the amount you’re borrowing. So if you’re taking out a $300,000 mortgage, you may be looking at anywhere from $6,000 to $15,000 to finalize your loan.
But that’s a really large range. And so if your lender’s closing costs fall at the high end of that range, it’s a sign you may be signing up to pay more money than necessary.
Now in some cases, you may find that a lender that charges a lower interest rate on a mortgage will make up for it by imposing higher closing costs. So you’ll need to run the numbers to see if you’re getting enough savings on your mortgage rate to make higher closing costs justifiable.
You should also know that some lenders may be open to negotiating their closing costs. While there are certain fees your lender can’t dictate, but rather, needs to pass on to you (for example, the prepaid property tax portion of your closing costs), there are other fees your lender can control, like your loan origination fee. It pays to have that discussion if the closing costs you’re looking at are high. And if your lender isn’t open to that, you may want to take your business elsewhere.
2. The initial communication hasn’t been great
There are a lot of moving parts that have to come together to finalize a mortgage. If your lender wasn’t particularly helpful or communicative during the application process, then it’s a sign you may be in for a frustrating number of weeks if you move forward with an actual mortgage.
Remember, it can easily take up to 60 days to close on a mortgage. Do you really want to spend eight weeks of your life chasing a lender for updates and getting aggravated?
3. You didn’t shop around
Even though mortgage rates are up across the board right now, ultimately, you’re apt to find that different lenders are able to offer a range of different interest rates. But if you’re thinking of signing a mortgage without having shopped around first, you could be setting yourself up for higher payments needlessly.
It’s always a good idea to compare offers when you’re in the market for a larger loan. And if you don’t take that time, you might end up regretting it.
The last thing you want to do is use the wrong lender for what could be the largest sum of money you’ll ever borrow in your lifetime. So if these signs apply to you, consider it a wake-up call to look at different options before moving forward with a mortgage.
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