Getting ready to buy your first home? Making a few mistakes along the way is common. Below we’ve listed 10 of the most common mistakes first-time homebuyers MAKE and how you can avoid them!
- Overlooking additional expenses.
- House-hunting before getting preapproved.
- Spending all their savings.
- Not being realistic about what’s affordable.
- Opening new lines of credit before the deal is closed.
- Maxing out on the mortgage limit.
- Neglecting to plan for the future.
- Forgetting inspection.
- Leading with emotion.
- Not meeting with a loan officer in person.
1. Overlooking additional expenses.
Once you’re officially a homeowner, there are a few additional expenses you’ll have to pay every month on top of your mortgage payment. Homeowners are responsible for paying property tax, insurance, and fees for any repairs that are required. Consider these additional expenses during your decision-making process because it’ll save you from a few surprise expenses in the future!
2. House-hunting before getting preapproved.
We understand: viewing houses is much more exciting than sitting in a lender’s office. However, being preapproved before looking at homes allows you to understand your options fully. Your lender will produce a loan amount based on your current financial situation, which can help you correctly narrow down which homes work for you.
3. Spending all their savings.
Spending the majority of your savings on the mortgage down payment can be a disastrous mistake. Many homebuyers reach deep into their savings so they can pay 20 percent or more for their down payment and avoid mortgage insurance. This practice can substantially reduce your monthly mortgage payment amount but it is unwise if it leaves you with no savings at all. Emergencies and unexpected expenses can pop up at any moment, and having a rainy-day fund to rely on offers invaluable peace of mind.
4. Not being realistic about what’s affordable.
What you think you can afford and what you actually can afford doesn’t always line up. Before you begin the home buying process, sit down and map out a budget for your expenses. Include car payments, loan payments, groceries, health insurance and any other fees you come across every year. Subtract this amount from your salary after tax to see where a mortgage payment can fit in with your other expenses.
5. Opening new lines of credit before the deal is closed.
If your credit score changes drastically between the pre-approval process and closing, your loan may be completely transformed. Extreme changes lead many lenders to modify their terms or rescind the offer entirely. During the home buying process, refrain from opening new lines of credit and make sure you’re meeting all of your monthly payments.
6. Maxing out on the mortgage limit.
You shouldn’t always take the largest amount your lender will throw at you. Staying below your mortgage limit will offer you more financial flexibility, in the long run, leaving you room to cover additional expenses. Use your monthly budget to figure out what your limit should be.
7. Neglecting to plan for the future.
It’s fun to imagine what your life will look like in a house. However, you should also take some time to question how the property and neighborhood will change over time. Consider what kind of development plans are in the works for the area and local zoning laws. These details will help realize whether the property is right for you.
8. Forgetting inspection.
Before closing, it’s essential to get an accurate assessment of the condition of the house. Without an inspection, important repairs or structural problems may get swept under the rug and come back to haunt you. Hold off on any commitments before receiving a full picture of the house’s current physical condition to prevent making a huge financial mistake.
9. Leading with emotion
Buying a home is an exhausting, frustrating process. It’s incredibly easy to fall in love with a house out of your price range and be unrealistic about your budget. During your search, remain vigilant and sensible about what you can afford. It’ll save you from severe financial hardships in the future.
10. Not meeting with a loan officer in person.
Online research is an excellent place to start, but your home buying process isn’t complete until you’ve met with a loan officer in person. A loan officer can help you fully understand every step of the mortgage process and clear up any confusion you may have.
At Assurance Financial, our home loan experts specialize in residential home loans and are dedicated to assisting you every step of the way.