Buying a home for the first time can be both exciting and stressful. This brings a lot of questions and big decisions to answer. Remember knowledge is power and it is always smart to be in the know. Here are some mistakes a first-time homebuyer should avoid.
Looking for a home before applying for a mortgage
You can’t buy a home if you cannot afford it rather purchasing through financing or cash. Today’s market is a sellers’ market with tons of competition. You have to have all your ducks in a row financially before you even start looking at inventory. Having a mortgage pre-approval or cash in hand gives you a leg up on other buyers that are bidding for the same home.
“Before you fall in love with that gorgeous dream house you’ve been eyeing, be sure to get a fully underwritten preapproval,” says Alfredo Arteaga, a loan officer with Movement Mortgage in Mission Viejo, California.
Talking to only one leader
Shopping around for a car or a major purchase is a no-brainer. This also applies to mortgages. Compare offers, if not you could potentially leave thousands of dollars on the table.
Shop around and look at at least three different lenders. Get quotes on the same day since the rates do change often. Compare each lender’s rates and fees. A great tool to use is Bankrate’s mortgage rate tables.
Buying more house than you can afford
This is a mistake that often occurs when it comes to buying a home. Potential homeowners fall in love with a home that stretches their budget a little too far. Rule number one, always stick to your budget. You can put your home at risk of foreclosure, not have enough to save for things like retirement, and have less room in your monthly budget for other expenses or unplanned bills.
Moving too fast
Purchasing a home is one of the biggest investments a person can commit to. Just like any other big decision, you should not rush into anything. Rushing can cause you to more cost later on down the line.
“The biggest mistake that I see is to not plan far enough ahead for their purchase,” Bush says.
Draining your savings
A homeowner should not put all their savings towards a down payment or closing costs. There will always be unexpected costs that come with a home.
“Some people scrape all their money together to make the 20 percent down payment so they don’t have to pay for mortgage insurance, but they are picking the wrong poison because they are left with no savings at all,” Conarchy says.
Being careless with credit
Your credit can define what you can financially obligate to. A mortgage lender will pull your credit for preapproval and again before closing. Do not open new credit cards, take out new loans, make large purchasing on existing credit cards or close existing accounts during your homebuying process.
Making decisions based on emotion
This is never a good idea as it can put you in a bad situation. Remember that purchasing a home is a financial decision and needs to be treated like any other financial investment.
“With this being a strong seller’s market, a lot of first-time buyers are bidding over what they are comfortable with because it is taking them longer than usual to find homes,” DiBugnara says.
If you are planning to purchase a home, contact a local Realtor in your area that can help you with the home buying process. A Realtor will know what to look out for and what is the best financial investment that will fit your family’s needs.
