Join a credit union
When you apply for a mortgage, you’ll want to pursue multiple options to see where you can get the best offer. In some cases, the best deal will be a local credit union. Some credit unions have more discretion about loaning money than traditional banks.
Trust the appraisal
Before a mortgage lender will actually write a check, it will order an appraisal, in which a professional appraiser determines the value of the property you plan to buy. The value is not what you’re willing to pay, but what comparable homes have sold for.
If the appraisal comes in much lower than what you’re paying, the mortgage company will want you to come up with more cash in order for your down payment to give you whatever percentage of equity you have agreed on. A low appraisal is also a warning sign that you, and your realtor, misjudged the market. That means you may be paying too much, because no mortgage company will accept that the house is worth what you agreed to pay.
Try to avoid PMI
Private mortgage insurance, more commonly known as PMI, is insurance on your mortgage that only protects the lender. It’s an added fee that in no way benefits you, and it’s generally mandatory if you have less than 20% equity in the home. Paying 20% down may not be easy, but if you can manage it, it’s worth it just to avoid PMI.
Always have a home inspection
Sometimes sellers will offer a home “as is,” meaning they won’t make any repairs or adjust the price if a home inspection finds anything amiss. In many cases, that means the eager homebuyers decide to skip the inspection altogether.
That’s a terrible idea. Even when buying an “as is” property, make sure you have the right to break the deal if an inspection — which you should insist on — turns up a problem you don’t want to deal with. That could cause the seller to reject your offer, but if that’s the case, you’re dodging a bullet. It’s important to know what you’re buying, and an inspection is the only way to do that.