Homeownership is a dream-come-true for many Americans. But as home-owning friends and colleagues will readily tell you, navigating the potential pitfalls of mortgages and homeownership can be difficult.

Many homeowners and would-be homebuyers have their home-owning dreams dashed because they failed to prepare for the potential pitfalls along the road to homeownership. Read on for tips on avoiding some common mortgage quagmires.

Mortgage Trap #1: Failing to Review Your Credit Before Applying 

Mortgage lenders use information from your credit report to determine if you qualify for a mortgage. Lenders also use your credit score decide the interest rate you’ll pay for borrowing the money to finance your home purchase.

A major error on your credit report? Potential lenders could decide that you don’t qualify for a mortgage at all. But even a small error on your credit report could cause your credit score to be just a little bit lower than it would have been otherwise, causing lenders to offer you rates that are just a little bit higher than they might have been if your credit report was accurate. Fractions of a percent in interest might not feel like a big deal. But tiny differences in interest rate matter when you’re talking about borrowing hundreds of thousands of dollars. An extra half-a-percent on your mortgage interest could mean you wind up paying thousands of extra dollars for your home.

So, if you’re seriously considering buying a home in the next year or two? Check out your credit report from all three of the big credit reporting bureaus. (You can get a free copy once a year from each of the three credit bureaus here.)

Mortgage Trap #2: Applying to Just One Mortgage Lender

When it’s time to buy clothing or electronics or appliances, most folks shop around before they buy. People check out different retailers. They research their options. The determine roughly how much they can expect to pay for what they want before they fork over their hard-earned cash.

But even though people put time and effort into comparison shopping for a new coat or computer, most would-be homeowners don’t shop around for mortgages. According to the Consumer Financial Protection Bureau, 77% of homebuyers only apply to a single lender. That means three out of four homebuyers do more comparison shopping for their shoes than they did for their mortgages. (We’re not sure how much the fanciest shoes in your closet cost. But we’d be willing to bet that they cost a lot less than you’re going to pay for your home.)

Not shopping with more than one lender significantly increases the chance that you wind up paying more for your mortgage than you need to. And it definitely means you aren’t sure that you found the best rate available.

When you’re ready to apply for a mortgage, resist the temptation to just head to your regular bank, accept the terms they offer, and call it a day. Doing so could mean you pay more for your mortgage each month, every month, and could cost you thousands of dollars over the long term.

Apply to more than one lender. Compare rates. Choose the lender whose offer is the best match for your needs. (Ahem: Morty’s application process lets you compare side-by-side offers easily and quickly.)

Mortgage Trap #3: Putting All of Your Savings Towards the Down Payment

Most lenders would like to see a borrower put at least 20% of the cost of their home in as a down payment. So that’s the number lots of would-be homeowners aspire to have saved up before they begin their home search.

Having 20% of the likely cost of your home in savings is a great goal, of course. Putting less than 20% down on your home means you you’ll probably wind up paying for mortgage insurance. It’s an extra expense on top of your mortgage payment that covers insurance to protect your lender in case you default on your mortgage. (The mortgage insurance fee goes away after awhile, once you’ve achieved around 20% equity in your home, but still. No one likes paying extra fees.)

But there are lots of first-time homebuyers who make the mistake of emptying their savings accounts entirely to meet that 20%-down mark. Using up all of your savings to avoid paying a few hundred dollars each year in mortgage insurance is risky. Without any money in savings, you could find yourself stuck with a mortgage to pay and no wiggle room in your budget for unexpected expenses or emergencies.

Make sure you still have some savings set aside after you’ve put in your down payment. Keep some cash on hand, even if that means putting less than 20% down, or waiting to buy a home until you’ve saved more.

Mortgage Trap #4: Not Understanding the Terms of Your Mortgage

This one may be the most important tip of all. Make sure you understand the terms and conditions before you sign-on-the-dotted-line.

Your mortgage is one set of terms and conditions you want to take the time to read all the way through to the end. People lost their homes in the Great Recession because they didn’t understand the terms of their mortgages. Mortgage regulations are tighter now than they were a decade ago. But you still want to make sure you understand what you’re agreeing to pay for your home.

Knowing the monthly payment amount isn’t enough. How long will you be paying this mortgage back? Is that payment amount fixed for the life of your mortgage? Will the interest rate change? If so, when?  How much will borrowing this money cost you, in total? What happens if you want to pay the mortgage back early? What happens if you pay late, or miss a payment all together?

You’ll also want to make sure you’ve done your homework on the types of mortgages available to you. Have you considered the pros and cons of a fixed rate mortgage versus an adjustable rate mortgage? Have you thought about choosing a 15- or 20-year mortgage over the more common 30-year mortgage? If you aren’t sure about your reason for choosing one type of mortgage over another, you should probably do some more research before making a final decision.

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