Top Mistakes Made By First-Time Housing Buyers
If you’re a first-time buyer, you’re likely to make common mistakes, no matter how prepared you may be. It’s a given that new home buyers will make common mistakes that have been repeated by their parents, siblings, and friends years ago.
However, with our guide, we’ll go through these typical mishaps and how to avoid them. There’s no reason for new home buyers to continue with this cycle! And after you’re done with this article, make sure to check out this link for homes for sale in Market Common!
Not Following A Set Budget
Diving in without knowing how much you can afford is a major waste of time. Don’t fall prey to daydreaming –– you might find yourself looking at homes you can’t even afford or viewing properties that are below your ideal price range. Most first-time buyers are looking to purchase a house with a manageable monthly payment that will not stress them out. Hence, in the interest of cost, it’s better to set your sights low and maintain expectations.
Alternatively, to figure out the difference between affordable and what’s a stretch, use a mortgage affordability calculator.
Getting Quotes From A Single Lender
It pays to compare offers while purchasing a mortgage, just as it does when buying any expensive item. Mortgage interest rates, as well as fees such as discount points and closing costs, differ from one lender to the next –– hence, it’s worth looking around for better rates.
However, most buyers often don’t shop for a loan. To avoid making this error, maximize your chances by applying to multiple mortgage lenders. According to NerdWallet, an average borrower can save up to $430 in interest by comparing prices with five other lenders. Additionally, keep in mind that all mortgage applications made within 45 days will be counted as one credit inquiry.
Insufficient Attention to Credit Reports and Correcting Mistakes
When deciding whether or not to grant a loan and at what interest rate, mortgage lenders will inspect your credit reports. You may be given an interest rate that is higher than you deserve if your credit report contains inaccuracies. That’s why it’s crucial to double-check your credit report.
How to prevent making this error? Each of the three major credit bureaus offers a free credit report once a year. You may dispute any errors you find.
Putting A Too-Small Down Payment
You’re not required to make a large 20% down payment to purchase a home; some loan programs let you do so with zero down or 3.5% down. For many, this may be a smart course of action but for others, it’s a source of regret.
It comes down to a matter of personal judgment when it comes to deciding how much to preserve. A larger down payment allows you to acquire a smaller mortgage, which means lower monthly payments. The disadvantage of delaying and saving more for a down payment is that home prices and mortgage rates have been rising, making it more difficult to buy the property you desire and perhaps preventing you from gaining building equity as home values rise. The goal is to make sure your down payment helps you get a monthly payment you can afford.
Not Applying For First-Time Homebuyer Programs
You probably don’t have a lot of money set aside for a down payment and closing costs as a first-time homebuyer. However, don’t make the mistake of assuming you’ll have to put off buying a home while saving for a large down payment.
Don’t be ashamed, but look for the assistance you need. There are numerous low-down-payment lending programs available and a competitive mortgage that provide first-time home purchasers with down payment assistance and competitive mortgage rates.
We recommend inquiring with a mortgage provider about your first-time home buyer suggestions and looking into local initiatives. You may be eligible for a down-payment-free loan from the US Department of Agriculture or a loan insured by the Department of Veterans Affairs. A minimum down payment of 3.5% is required for Federal Housing Administration (FHA) loans, while some conventional lending programs allow for down payments as low as 3%.
Using Up All Your Savings
If you purchase a pre-own property, it will almost certainly require an unforeseen repair within a short period. For example, you may need to replace a cooler or even fix the plumbing.
Instead, set aside enough money for a down payment, closing charges, and moving expenses, as well as any necessary repairs. This information is accessible. Lenders will provide you with closing cost estimates, and you can receive moving cost estimates by calling around.
Spending On Credit Before Finalizing The Loan
If you apply for a mortgage, you will have to close, or finalize, the loan and receive the keys to the house a few weeks later. The time in between is crucial: you want to avoid damaging your credit as much as possible. The landlord’s final decision is based on your debt-to-income ratio (the percentage of your income that goes toward monthly debt payments) and credit score. Applying for credit can reduce your credit score by a few points. Getting a new loan, or adding to your monthly debt payments, will increase your debt-to-income ratio. Both of those are bad from the mortgage lender’s perspective if it reflects as such in your credit when they check –– which they will do so a week before closing).
Hence, you should avoid damaging your credit as much as you can by waiting to apply for credit –– including getting a new credit card, purchasing furniture or appliances on credit, or taking out an auto loan before the mortgage closes is a bad idea.
Being Unprepared For Additional Bills
Keep in mind that buying the home is not the end of it! The monthly bills continue to pile up after you purchase a property. If you aren’t prepared, this may come as a shock. These bills are frequently paid by renters as well. A new home, on the other hand, may come with increased costs and whole new bills, such as homeowner association fees.
We suggest consulting with a real estate agent to learn how much property taxes and insurance in the area normally cost. Ask to see the seller’s bills for the last 12 months the home was to get an idea of how much you’ll be paying.
Underestimating Repair Costs
Comparison is key! For pricey repairs, such as roof replacements, get multiple estimates. A professional agent should be able to recommend contractors who can provide you with estimates.
However, you should get independent recommendations from friends, family, and coworkers so you can compare those figures to the ones you get from contractors your agent recommends.
Remember! These are all avoidable mistakes. As long as you’re prepared and well researched, you will be ready to save yourself from the pain and regret that many have already faced when buying a home.