My House Buying Mistakes

I bought my first house in 2006. This was my first real big purchase, and the first time that I dabbled in the real estate market. While I am still in the house that I bought, and I love it, I now know that I made a lot of mistakes. I hope you will be able to learn from them so that you will not have to go through what I have gone through over the last few years.

Mistake #1 - Use a Mortgage Broker

The first mistake that I made was using a mortgage broker. While these services can help you to find a mortgage if you do not qualify for a normal bank loan, they will offer you mortgage options that are (1) highly predatory and (2) usually beyond your means. For example, while my income was less than $30,000 a year the mortgage broker did not put a cap on the limit for the amount of money that I could borrow. This may sound like an attractive quality, but it can get you into real trouble if you are not prudent in setting limits for yourself.

Mistake #2 - Interest Rate Inconsistencies

When I found a house that I wanted to purchase the mortgage broker would not give me a final interest rate. Instead my broker only provided me with an estimate, and I did not find out what the final rates on my loans were until I was in closing. In fact, I signed an agreement for an interest rate while filing out my paperwork, only to find out at closing that this rate had be increased by two points during closing. This really put me into a tough position as I had no choice but to accept the higher rate so that I was not in breach of contract with the seller. The lessons here are get the final interest rate in writing and solidified before closing is scheduled.

Mistake #3 - 100 % Loan

One of the biggest mistakes that I think I made was getting a 100 % loan. This means that the first mortgage was an 80% loan and the second was a 20% loan. This allowed me to get into my house for under $3,000, which is a good deal. The problem was that I really was not financial ready to deal with two mortgages, particularly ones that had high interest rates.

Solution

I struggled for three years to keep up with the financial burdens produced by my predatory loans. Fortunately, I looked into the loan modification programs that were made available as part of the country's financial recovery program. As a result, my first mortgage has an interest rate that is in line with a traditional bank loan, under five percent, and my second mortgage also has been reduced to a fraction of its original percentage.

The lesson that I learned from all of my mistakes was that mistakes can be corrected if you are willing to put in the effort to look for solutions.