Buying a home is one of the most significant life decisions you will ever make. It represents a massive milestone in your life, but many financial implications usually accompany it. Although different people have different reasons for purchasing a new home, the mistakes that many first-time buyers make are very similar. According to some experts, about 19% of Americans, for example, are in debt as a result of expenses related to owning new homes. Do you think you are ready to buy a house? Do you want to ensure that your decision to purchase a home does not land you into debt or other difficulties? Then be sure to avoid these common mistakes.
Not agreeing with your partner
If you have a spouse or a partner, both of you must be on the same page about getting a new home before taking the first step. This stage is especially crucial if you are not bearing the financial implication alone. That is because the last thing you want is to create conflict or division in your home. Besides your spouse, it would be best to speak with anyone else who may have some financial role to play in the subject.
Not doing adequate preparation and research
It is essential to know your financial muscle and available options while understanding your family’s financial situation. First of all, analyse your current assets, credit standing, decipher your debts, and get the required financial approval before taking the next step to shop for your preferred house. Also, consider the location and be sure that it is favorable for you and your family. Be sure that you are comfortable with the neighborhood, as you may be living there for a long time with your family. If you are moving with family and kids, you should also consider safety, crime level, quality of schools, and even transportation issues.
Shopping for your home before getting a mortgage
Shopping for your home before getting a mortgage
Before you dash off house shopping, it is advisable to first speak with a mortgage professional, unless you have a fat bank account. If you need financial assistance, it is advisable to have a conversation with a mortgage expert about your chances of getting preapproved for a loan. The excitement involved in searching for a new home may cause you to postpone speaking to a lender about your finances, but that is a mistake.
Before you receive pre-approval for your home, your lender will review your financial status, considering your income and expenses before giving you the green light, they will look at the dti for mortgages which is your income to debt ratio to make sure you can afford it. This kind of financial backing will provide you with a competitive advantage over other people looking for the same house, as it will show the seller that you can back your offer.
Getting just one mortgage rate quote
Just as you will probably want to check on several houses to compare their prices, you should also do the same when getting a mortgage quote. Mortgages are expensive; therefore, you need to take enough time to search and make different options available to you. Next, compare the other quotes you receive from various offers without committing to any of them immediately. The interest rates on mortgages differ from one lender to another; some may be higher or lower than another, which is why it is a mistake to rely on just one quote. Pay attention to how much monthly mortgage payments each option gives over the years. You can use a 20 year mortgage calculator to determine your monthly mortgage payments based on how much you borrowed, the duration, and the interest rate.
Cleaning your bank account
Buying a home is always an expensive undertaking, even with the help of a financial lender. And when you factor in closing costs and down payments, the amount you have to pay could be higher than you bargained. Unfortunately, most first-time buyers opt for cleaning out their bank accounts to get their home while forgetting about the extra expenses like ownership costs and moving in fees. A better approach is to have at least 20% of your home’s price saved to take care of extra expenses beyond the down payment. The thing you want to do is spend every penny you have in your bank account without having any left for additional costs or emergencies.
Not ensuring you have a good credit score
Depending on your current credit score, you may want to make some needed improvements. For example, a conventional loan will typically require a credit score of 620 or higher in some cases. Why is this important? Knowing the credit score needed to buy your home is essential, as it helps determine the interest rate and other expenses you might pay on your mortgage loan. A good credit score will put you in good standing with your lenders, as it shows you’re more likely to carry through your loan payments consistently and on time.
Ensuring you have a good credit score also reduces the amount of money you may have to spend as a down payment.
Being influenced by the market
Many people are tempted to decide to buy a house based on specific market projections and predictions. That means they end up waiting, for example, for particular factors that might cause prices to fall before making their move. The problem with this approach is that not only will you be taking huge chances with your family’s future, but that you may also end up confused by the mixed messages the market always throws around. This does not change the fact that property mostly moves in cycles – with times when the market price may suit either the buyer or the seller. The most important thing is to have your financial situation well organized, know your budget, have a good credit score, and consider your current and future needs. Doing this will take you out of the influence of the market.
Not seeking the service of a buyer’s agent
An exclusive buyer’s agent has the experience and resources to look out for your best interest, and this is particularly important if you are a first-time homebuyer. Most make the mistake of dealing directly with the seller’s real estate agent. Unfortunately, these agents are more interested in looking out for the seller’s interest and trying to get the best price for them. This will work against you, especially when you lack the experience of dealing with such agents. A seller’s real estate agent can easily overmatch a novice buyer when it comes to negotiation skills. This is why you need to hire the service of an exclusive buyer’s agent. Although hiring the latter may come with some extra cost, that cannot be compared to how much they’ll be able to save for you. Besides, an exclusive buyer’s agent has better knowledge about the real market value of buildings and the location than you may have.
Not considering first-time homebuyer programs
Besides the lack of experience negotiating your way to a good deal, you may also not have enough money saved up for closing costs and down payments. However, this should not mean that you have to postpone or delay your dream of owning a home until you have saved enough for all your expenses. This is where first-time homebuyers’ programs may be of help; fortunately, there are many programs out there for first-time home buyers. All you need to do is to speak with your mortgage lender about what your options are. Depending on what group or association you belong to, you may get significant cuts on your down payment cost. For example, if you qualify for the Veterans Administration loan, you may not even need to make any down payment.