Avoid Common Mortgage Mistakes

Ignorance isn't bliss when it comes to mortgages-it's costly. The mortgage world is indeed complex; but it will be more overwhelming if you stumble through the refinance process without a clue. Here are some simple tried and true mortgage fundamentals that can get you get a solid home loan.

Put a home mortgage at the top of your shopping list. This rule applies more to homebuyers than consumers planning a refinance. Before you start shopping for a home, shop for a mortgage. Get pre-qualified for a loan. This will tell you just how much house you can afford, and allow you to avoid being tempted by a home that's out of your price range.

Don't spend too much, and don't spend too little. Life is a balancing act, and refinancing a mortgage is no different. It would be foolish to spend too much of your monthly income on a bloated house payment. Conversely, you're probably borrowing too little if you pour all your money into a down payment. Keep some money liquid for future expenses. Otherwise, you may wind up pulling that equity back out in the form of a home equity loan if you ever become strapped for cash.

Ask plenty of questions from a trusted lender. This is a two-part tip. First, ask friends and family for referrals on trustworthy lenders. Second, when you've got your list narrowed to a few reputable ones, take the time to understand every facet of the loan proposal. Be careful to avoid any interest-only mortgages or adjustable-rate mortgages (ARMs) unless you truly understand how they work. Check all the costs, and make sure that you're clear on exactly what you're spending.

These simple tips are just the tip of the iceberg when it comes to a mortgage refinance. Even if you don't become an expert, a little knowledge can go a long way toward helping you find the right mortgage.