Avoiding Common Mortgage Mistakes: An Interview with a Leading Mortgage Banker

Buying a home is one of the most significant financial milestones in a person’s life. For many Kenyans, this dream is brought to reality through mortgage financing. However, the mortgage process is fraught with complexities and potential pitfalls that can turn what should be an exciting journey into a financial burden.

From choosing the wrong lender to misunderstanding loan terms, these mistakes can cost buyers millions over the life of their loans. To help shed light on these issues, we sat down with Jane Mwangi, a seasoned mortgage banker with over 15 years of experience in the Kenyan real estate and finance sectors. Jane has worked with hundreds of clients, guiding them through the mortgage process and helping them avoid common mistakes.

In this interview, Jane shares invaluable insights into the most common missteps buyers make when securing a mortgage, and practical advice on how to avoid them. Whether you’re a first-time homebuyer or looking to refinance, her expert guidance could save you money, time, and stress as you navigate the path to homeownership.

Q: What’s the most common mistake buyers make when applying for a mortgage?

JM:
The biggest mistake is jumping into the process without understanding their financial health. Many buyers don’t review their credit score or debt-to-income ratio before applying, and these are critical factors lenders look at. Your financial profile determines not just your eligibility but also the interest rate you qualify for.

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Q: How can buyers improve their financial readiness?

JM:
Start by checking your credit report for errors and ensure your debts are manageable. Aim for a debt-to-income ratio of 36% or lower, and if possible, pay down existing loans. A stable income is also key—lenders want to see that you can consistently meet your monthly repayments.

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Q: Many buyers settle for the first mortgage offer they get. What’s your advice?

JM:
That’s a costly mistake. Rates and terms vary significantly between lenders, so it’s essential to shop around. Even a small difference in interest rates can save—or cost—you hundreds of thousands over the life of a loan. I always recommend comparing at least three lenders, including banks, Saccos, and microfinance institutions.

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Q: Hidden costs seem to trip up many borrowers. What should they watch out for?

JM:
Absolutely. Buyers often focus solely on interest rates but overlook additional costs like loan processing fees, insurance premiums, stamp duty, and legal charges. These can add a substantial amount to your total cost. Always ask your lender for a detailed breakdown of all fees before signing the agreement.

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Q: What about choosing between fixed and variable-rate mortgages?

JM:
This is a critical decision. Fixed rates provide stability, which is great if you want predictable payments. Variable rates, on the other hand, can start lower but may increase depending on market conditions. Buyers need to assess their risk tolerance and long-term financial goals. I always recommend discussing this with a mortgage advisor.

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Q: Borrowing the maximum amount seems tempting. Is it a good idea?

JM:
It’s not. Just because you qualify for a large loan doesn’t mean you should take it. Overextending yourself leaves little room for emergencies or future investments. A good rule of thumb is to keep your housing expenses under 28% of your monthly income and total debt under 36%.

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Q: How important is getting pre-approved for a mortgage?

JM:
It’s incredibly important. Pre-approval not only helps you understand how much you can afford but also shows sellers that you’re serious. It can make the difference in a competitive market. Plus, it speeds up the application process once you find the right property.

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Q: Many buyers hesitate to seek professional advice. What’s your take on that?

JM:
I understand the hesitation, but the mortgage process is complex, and mistakes can be costly. A mortgage advisor can help you compare options, negotiate better terms, and avoid common pitfalls. Platforms like Valuers.Africa and ValuationPort are great resources for connecting with professionals.

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Q: What’s your final piece of advice for first-time homebuyers?

JM:
Do your homework and don’t rush the process. Buying a home is a significant financial commitment, so take the time to understand all the costs involved and work with trusted professionals. The decisions you make now will impact your financial future for years to come.