Avoid these mortgage mistakes in New Jersey! Many NJ homebuyers stumble by not checking their credit early, skipping pre-approval, or only talking to one lender. Don’t just focus on interest rates; consider the APR and avoid draining your savings for the down payment. Refrain from taking on new debt before closing. Get pre-approved, not just pre-qualified, and budget for more than just the down payment.
Whether you’re shopping for your first home or upgrading, there are plenty of traps to avoid. The last thing you want is to lose the perfect house because of a simple mistake.
Not Checking Your Credit Score Early Enough
Your credit score decides your mortgage rate. The better your score, the less you pay in interest. But too many NJ homebuyers only check their credit at the last minute, when it’s too late to fix anything.
Here’s what to do:
- Check your credit score months before house hunting.
- If it’s lower than expected, pay off debts, fix late payments, and dispute errors.
- Keep credit card balances low—ideally under 30% of your limit.
Even a small improvement in your score can save you thousands across the life of your mortgage.
Skipping Mortgage Pre-Approval
Walking into an open house without a pre-approval is like trying to buy a car without knowing your budget. Sellers want serious buyers, and a pre-approval letter shows them you mean business.
Without it, you could miss out on a great home while waiting for a lender to approve you.
Pre-approval gives you:
- A clear budget (so you don’t waste time looking at homes you can’t afford).
- More negotiation power—sellers take you seriously.
- Faster closing because part of the paperwork is already done.
Get the pre-approval before you start house hunting. It makes everything easier.
Only Talking to One Lender
I get it—shopping for loans isn’t fun. But not doing it can cost you big-time. Mortgage rates, fees, and terms vary between lenders. If you take the first offer you get, you could be leaving money on the table.
Here’s what to do instead:
- Get quotes from at least three different lenders.
- Compare total loan costs, not just interest rates.
- Ask about lender fees and if they can be negotiated.
A half-percent lower interest rate doesn’t seem like much, but over the life of a 30-year mortgage, it adds up to tens of thousands in savings.
Focusing Only on the Interest Rate
We all want the lowest rate, but interest is only part of the equation. Some lenders advertise super-low rates but charge high fees.
Instead of just looking at the rate, compare the Annual Percentage Rate (APR). The APR includes interest and fees, so you get a more accurate picture of the loan’s true cost.
More things to watch for:
- Private Mortgage Insurance (PMI) if your down payment is under 20%.
- Loan origination fees—some lenders charge thousands just to issue the loan.
- Prepayment penalties—some loans charge fees if you pay off your mortgage early.
You’re not just picking a mortgage—you’re picking a long-term financial commitment. Make sure it works in your favor.
Draining Your Savings for the Down Payment
Yes, a big down payment lowers your monthly mortgage. No, you don’t want to empty your savings to do it.
Too many NJ homebuyers scrape together their whole life savings for that 20%, leaving them nothing for emergencies.
Better approach:
- Put down what you can comfortably afford, not every last dollar.
- Keep at least 3-6 months of expenses in savings.
- Factor in closing costs, moving expenses, and repairs.
Owning a home is great—until the furnace breaks in the middle of winter and you have nothing left to fix it.
Taking on New Debt Before Closing
You got pre-approved, found your dream home, and just signed the paperwork. Time to go buy new furniture, right?
Wrong.
Any big purchase on credit—new car, furniture, or even opening a new credit card—can mess up your mortgage approval. Lenders check your credit again before closing, and new debt can kill the deal.
Wait until after you officially closebefore making any big purchases. That dream couch can wait a few weeks.
FAQ
Should I get pre-qualified or pre-approved?
Pre-qualification is a quick estimate. Pre-approval is an actual commitment from a lender. Sellers take pre-approvals seriously—pre-qualification, not so much.
How much should I save for a down payment?
20% avoids PMI, but you can get a home in NJ with as little as 3-5% down. Just make sure you have enough left over for other costs.
What’s the biggest mortgage mistake first-time NJ homebuyers make?
Not budgeting for closing costs and unexpected home expenses. The down payment isn’t the only thing you need to save for. Want more tips for buying a home in New Jersey?