The Seven Deadly Sins in Home Loan Lending

The seven deadly sins in home loan lending are no different from the seven deadly sins outlined in the Bible. The latter damns your soul; the former can decimate your finances. Whether you're buying a house by yourself, with your partner, or with a friend, be sure to avoid the following costly mistakes.

Unless you are earning the equivalent of three people's wages, there's no way you can pay off a house loan, car loan, and a student loan at the same time. In fact, if you're living on the budget of the recently employed, you have no business setting your sights on that sprawling four-bedroom number in the city's most exclusive neighborhood. Clearly, you cannot serve two masters at the same time. Before you go home loan lending, separate your needs from your wants. Sort your priorities, and decide whether it's a house or a new car that you need.

In home loan lending, costs follow only one trajectory: upward. Downpayment and monthly payments are not the only costs you have to budget. You need to factor in insurance and "start-up" expenses, in the form of furniture purchases and getting the cable TV and the telephone turned on.

Home loan lending experts point out the only way to make sure you get the best deal in the market is to see exactly what type of deals are in the market. So, shop around for as long and as often as humanly possible.

Home loan lending is no joke. Whatever contract you sign is legally binding between you and your broker. Be sure to pore over the contract and ask questions about the terms you do not understand. A home loan lending contract, no matter how seemingly straightforward, is one document you should not peruse with glazed eyes and a wandering mind. Ask about suspicious-looking clauses. If it reeks of fish, it probably is fishy.

Many lenders and brokers will always try to foist huge houses on you. After all, the bigger and costlier the house they sell, the chunkier their commission. Be very wary of offers that sound too good to be true. In particular, know that grandfather loans will earn you very small house equity.

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