The Top 5 Mortgage Mistakes to Avoid
Buying a home can be an exciting and rewarding experience, but it can also be a daunting and overwhelming process, especially for first-time homebuyers.
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Mortgages are a significant financial commitment, and making mistakes during the process can have serious consequences. In this blog post, we'll explore the top 5 mortgage mistakes to avoid.
1. Failing to Check and Improve Your
Credit Score
Your credit score plays a significant role in determining your eligibility for a mortgage and the interest rate you'll receive. Many first-time homebuyers make the mistake of failing to check their credit score or not taking steps to improve it before applying for a mortgage.
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To avoid this mistake, check your credit score and take steps to improve it if necessary. This may include paying off outstanding debts, making on-time payments, and disputing any errors on your credit report. A higher credit score can lead to a lower interest rate and a more favorable mortgage offer.
2. Ignoring
Closing Costs
Another common mistake is ignoring closing costs. Many first-time homebuyers are unaware of the various fees associated with closing a mortgage, such as attorney fees, title search fees, and appraisal fees. These costs can add up quickly and significantly impact the total cost of the mortgage.
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To avoid this mistake, research the average closing costs in your area and budget accordingly. Be sure to factor in these costs when considering the overall cost of the home.
2. Ignoring Closing Costs
Another common mistake is ignoring closing costs. Many first-time homebuyers are unaware of the various fees associated with closing a mortgage, such as attorney fees, title search fees, and appraisal fees. These costs can add up quickly and significantly impact the total cost of the mortgage.
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To avoid this mistake, research the average closing costs in your area and budget accordingly. Be sure to factor in these costs when considering the overall cost of the home.
3. Not Getting Pre-Approved
Getting pre-approved for a mortgage is an essential step in the home buying process. Pre-approval gives you a clear idea of how much you can afford to spend on a home and helps you avoid the disappointment of falling in love with a home you can't afford.
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To avoid this mistake, get pre-approved for a mortgage before you start shopping for a home. This will help you narrow down your search to homes that are within your budget and prevent you from wasting time on homes that are out of reach.
4. Taking on Too Much Debt
Taking on too much debt before or during the mortgage process can have serious consequences. Lenders look at your debt-to-income ratio when determining your eligibility for a mortgage. If you have too much debt, you may not qualify for a mortgage or may be offered a higher interest rate.
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To avoid this mistake, avoid taking on new debt before or during the mortgage process. This includes opening new credit cards, taking out a car loan, or making large purchases on existing credit cards.
4. Taking on Too
Much Debt
Taking on too much debt before or during the mortgage process can have serious consequences. Lenders look at your debt-to-income ratio when determining your eligibility for a mortgage. If you have too much debt, you may not qualify for a mortgage or may be offered a higher interest rate.
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To avoid this mistake, avoid taking on new debt before or during the mortgage process. This includes opening new credit cards, taking out a car loan, or making large purchases on existing credit cards.
5. Choosing the Wrong Mortgage
Choosing the wrong mortgage can be a costly mistake. There are various types of mortgages available, and each has its pros and cons. Choosing the wrong mortgage can lead to higher interest rates, higher monthly payments, and a more significant financial burden in the long run.
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To avoid this mistake, research the different types of mortgages available and choose the one that best fits your financial situation and goals. Don't be afraid to ask your lender questions and seek advice from a financial advisor.
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💸 What Is Debt Yield & Why It Matters in CRE Financing 🏢
💸 What Is Debt Yield & Why It Matters in CRE Financing 🏢
📊 Understanding Debt Yield: The Key Metric Every Lender Watches 👀
💡 Introduction
In commercial real estate (CRE) lending, few metrics carry as much weight as debt yield. Whether you’re an investor seeking financing or a broker structuring deals, understanding this metric is essential. Lenders rely on it to gauge the true risk of a loan — independent of market volatility or property appraisals.
🔍 What Is Debt Yield?
Debt yield is a measure of a property’s net operating income (NOI) relative to the total loan amount. It shows how quickly a lender can recoup their investment if they were to take ownership of the property.
Formula:
Example:
If a property generates $1,000,000 in NOI and the loan amount is $10,000,000, the debt yield is 10%.
This means that — ignoring all other factors — the lender would earn a 10% return on their investment from the property’s income alone.
💰 Why Do Lenders Care About Debt Yield?
Debt yield gives lenders a pure measure of risk. Unlike loan-to-value (LTV) or debt service coverage ratio (DSCR), it’s not influenced by appraisals or interest rates.
Here’s why lenders love it:
1.Objective Risk Assessment:
Debt yield focuses solely on the property’s income, providing a clear view of financial stability.
2.Market-Neutral Metric:
It doesn’t depend on changing property values or cap rates — making it consistent in volatile markets.
3.Default Recovery Insight:
A higher debt yield means lenders could recover their investment faster in a foreclosure situation.
4.Regulatory Benchmark:
Many lenders set minimum debt yield requirements (8–10%) for CRE loans, ensuring the property can sustain performance through downturns.
📈 Typical Debt Yield Benchmarks
·Conservative lenders (banks, life companies): 10–12% minimum
·Bridge or private lenders: 8–9% acceptable
·High leverage or value-add projects: May drop to 7–8% depending on exit plan
Debt yield requirements tighten as market uncertainty rises, which is why strong income-producing properties attract better financing terms.
🧩 Debt Yield vs. DSCR: What’s the Difference?
While both measure loan safety, DSCR focuses on monthly cash flow coverage (NOI ÷ Debt Service), while Debt Yield focuses on overall loan exposure (NOI ÷ Loan Amount).
Lenders use both to cross-check a deal’s health, but if one metric tells the truth in turbulent times — it’s debt yield.
🏦 The Medallion Funds Advantage
At Medallion Funds, we understand what lenders are really looking for. Our team structures deals to meet or exceed debt yield and DSCR thresholds — giving you access to better rates, higher leverage, and faster approvals across 600+ lenders.
📅 Schedule a strategy call today to see how we can optimize your next deal.
🔗 https://billrapponline.com
✅ Conclusion
Debt yield might sound like a technical metric, but it’s the heartbeat of every commercial real estate loan. By mastering it, investors and brokers alike can position their deals with confidence — and speak the language lenders respect most: risk-adjusted return.
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© 2023-2024 Bill Rapp, Medallion Funds LLC, Director of Capital Advisory
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This is not an offer to enter into an agreement. Not all customers will qualify. Information, rates and programs are subject to change without notice. All products are subject to credit and property approval. Other restrictions and limitations may apply. Copyright © 2021 | Medallion Funds
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Corporate Address : 2651 N. Green Valley Pkwy STE. 101 Henderson, NV 89014
Corporate NMLS NMLS # 1825831 | Company Website: https://medallionfunds.com/bill-rapp/
Copyright ©2021 | Mortgage Viking Team Licensed to Do Business | NMLS # 228246
This is not an offer to enter into an agreement. Not all customers will qualify. Information, rates and programs are subject to change without notice. All products are subject to credit and property approval. Other restrictions and limitations may apply
Corporate | NMLS ID NMLS # 1825831
Corporate Address : 2651 N. Green Valley Pkwy STE. 101 Henderson, NV 89014 https://medallionfunds.com/bill-rapp/