Taking out a mortgage to finance a home has become a very common occurrence. Yet, as common as it is, it is important to keep certain points in mind to ensure you make the right choice on your mortgage.

First-timers may often make mistakes while taking out a mortgage as they are new to the process. If you find yourself in this situation, here are three common mistakes made when getting a mortgage by first-timers.

Settling for the amount the bank recommends
You have to remember that your mortgage means business for the bank. While you may fear rejection of the application, in many cases, the bank may surprisingly approve you for an amount that is much larger than what you initially expected. This can turn things around and make you consider buying something beyond your means. Yet, this can often cause you to misjudge and buy something that is too expensive for you to pay back in the long run.

Instead of making this error, decide your budget and how much you can afford. Even if the bank offers you more, resist the temptation to overspend and stick to the amount you know you can afford.

Making an extremely low down payment
It is always advisable to put in at least 20% of a down payment when taking out a mortgage. Now, there are means by which you can pay less. For instance, FHA mortgages might even require a down payment that is as low as 3.5%.

However, when you make such a low down payment, you will incur other costs. Mostly, these extra costs are Private Mortgage Insurance (PMI) premiums. This will add to your expenses. A PMI payment can cost you anywhere from 0.5% to 1% of your total mortgage amount each year. That can actually add up to a huge bill of wasted dollars that run in thousands. Remember that the PMI simply benefits the lender and protects them in case the buyer fails to repay the loan. So, you are actually better off making a larger down payment.

Not researching locking and floating rates
Most first-time mortgage applicants do not completely understand the difference between locking in their mortgage rate and opting to float it. Not taking the time to understand this is one of the common mistakes made when getting a mortgage.

To explain the two options in simple terms, a locked rate can be locked in for anywhere between 30 to 60 days or slightly more. If you opt to float your rate, you may get a different rate at the beginning that may be changed later on.

With a locked rate, you pay more in the form of a fee, which can be a fixed amount or a percentage of the mortgage amount. This lock can help you plan your payments with a fixed rate. One drawback is that if the rates drop, you will still have to pay the fixed rate. Still, if you feel the rates may rise, it is wise to lock in your rate.