A troubling trend emerged over the last few months. The First American Loan Application Defect Index, which measures the frequency of defects in the information provided for mortgage loan applications, has begun to increase. That hasn’t been the case since September 2013. And it hits close to home; Florida is the second-riskiest state in the nation for foreclosure.

Mortgage loan defects for first-time home buyers include things like insufficient credit, misrepresented income, inadequate mortgage insurance, and unpaid debts. FannieMae lists more than 200 categories of potential defects on its website.

Protect Yourself

A mortgage is the biggest debt most people face, so it’s very important to be careful you don’t bite off more than you can chew. Here are some tips to help keep you from making a costly mistake:

  • Decide What You Can Pay: Rather than letting a mortgage lender determine how much house you can afford, determine what monthly payment would be comfortable for you, and use that to figure out how much you can pay for your home.
  • Count All Your Expenses: There’s more to home ownership than a mortgage payment. Utilities, maintenance, taxes, insurance, and other expenses can add a lot to your monthly bills. Make sure you budget accordingly.
  • Fix Your Rate: With interest rates starting to climb, some people may be tempted to look at adjustable-rate mortgages (ARMs). But unless you plan to move in a few years, an ARM may get expensive. Eventually, the ARM will reset, probably at a higher rate.
  • Check Your Credit & Repair What You Can: Obtain a free credit report at annualcredit.com and check it for errors. Give yourself six months to a year to fix any mistakes and make changes that will improve your score. Paying down loans and making payments on time will improve your score.
  • Shop for Deals: Many borrowers are eligible for special loan programs, such as loans offered by the Department of Veterans Affairs (VA). Many cities, counties, and states also offer home-buying assistance.

Ask the Experts

If you are a first-time home buyer, and you’re concerned about your ability to buy a home, contact us at Embrace Home Loans. We’re experts in home mortgages, and we can help you locate programs or financing that will put you in the home you want. Give us a call at 407-733-6425 and get our perspective.

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