7 First Time Home Buyer Mistakes and How to Avoid Them
Buying your first home is exciting, but it can also be confusing and a little scary. You’re making a huge personal and financial decision when you buy your first home and there are probably a lot of unknowns. Before you take the leap into the home buying process, check out the common mistakes first time home buyers make and how to avoid them.
1. Looking for a house before looking for a mortgage
There’s nothing worse than finding your dream home and then realizing that it is way out of your budget. That’s why it’s important for you to figure out how much you can afford before you start looking at houses. Use a mortgage calculator to calculate how much you can afford, what your monthly mortgage payment will be and more.
2. Not getting pre-qualified
Much like not knowing your budget can be a home buying blunder, not getting pre-qualified for a mortgage loan can also be a missed opportunity.
A mortgage lender can help you get pre-qualified for a mortgage loan. During the pre-qualification process, the mortgage lender will review your income and expenses. Through this process, you’ll be able to figure out how much you can afford, what your down payment will be and how much your monthly mortgage payment will be. Being pre-qualified also makes you more appealing to buyers because it proves you’re a serious buyer.
3. Not shopping around for the best mortgage
Like with any big purchase, you need to do your research. Going with the first mortgage lender may get you the right loan, but you’ll never know if you don’t shop around and talk to different lenders. Rates, fees and closing costs can vary from lender to lender. Exploring all your options can help you find the right fit.
4. Forgetting about extra costs
There are a lot of extra costs that come with purchasing a home, and not being prepared for those costs could empty your savings account. Make sure you’re prepared to cover closing costs, insurance, moving expenses, utilities and other fees at the time of purchase.
You’ll also want to keep in mind that owning your own home comes with repairs that you’ll have to fix, so make sure you have enough saved up for emergencies.
5. Assuming you need 20% for a down payment
You may have heard that you’ll need 20% for a down payment on a house. Nowadays, that’s just not the case. The median down payment on a home in 2020 was about 12%. While putting 20% down does make your mortgage payments smaller, it’s not required to buy a house.
6. Not looking for first time home buyer programs
Since you’re new to the home buying scene, you may not be aware of programs offered to assist first time home buyers. There are several low down payment programs that help buyers reach their home ownership goals sooner. Ask your mortgage lender what programs are offered and if they can help you.
7. Applying for credit before the sale is final
The time between when you apply for a mortgage and when you close on the home is an important time. During this period, your mortgage lender will be checking your credit score to make sure it hasn’t fallen. Don’t apply for a new credit card, put large purchases on a credit card or take out an auto loan before you close. This could harm your credit score and affect your debt-to-income ratio. This could cause your closing to be delayed, or the lender may cancel your mortgage altogether.
As you look for your first home, keep these tips in mind to make your home buying process go smoothly and to avoid making common first time home buyer mistakes.