Common Mistakes First-Time Home Buyers Should Avoid
No amount of reading and research can really prepare you for the experience of purchasing your first house. Not only will it probably be the most valuable thing you have ever bought – and the most expensive – but it needs to feel like home, not just a house. It’s a tremendously important and emotional experience, and, while there’s nothing that can prepare you absolutely, you can definitely put yourself ahead of the curve by avoiding these four common mistakes first-time homebuyers often make.
Mistake #1 – Forgetting Closing Costs
Saving enough for a down payment is a huge achievement, and one you should be proud of. But it is important not to forget that the down payment is not the only expense incurred when purchasing your first new home. Closing costs are just as they sound: the additional costs associated with closing the sale of the home. These might include brokers’ fees, insurance, appraisal fees, and the cost of the background checks and credit reports you will need to qualify for a loan. Closing costs are usually far less than the cost of the down payment, but they do add up. If you haven’t budgeted for them, you could find yourself starting life in your new home with unexpected debt, or worse: unable to close on the home purchase at all.
Mistake #2 – Biting Off More Mortgage than You Can Chew
The kind of mortgage loan you qualify for may not be the kind of mortgage loan you should be taking. Lenders will evaluate the size of mortgage they can offer you based mostly on your income and outstanding debt. This gives them a general picture of how much money you can put towards a monthly house payment without defaulting. That general picture, however, does not account for any of your essential and lifestyle expenses such as food, clothing, utilities, and entertainment. Getting approved for a big mortgage on an expensive house is a wonderful feeling, but make sure you have budgeted your other monthly expenses before you accept. You don’t want to risk the inability to cover the other expenses that allow you to enjoy living in the house in the first place.
Mistake #3 – Choosing the Wrong Lender
Your parents might recommend getting your mortgage with the same bank they’ve been using for decades, but you won’t know if that’s really the best choice for you until you’ve done some comparison shopping. Banks and lenders have a wide range of criteria and terms for lending: some lenders specialize in first-time home buyers, others work specifically with particular income brackets, and your local bank might have a particularly good offer if you’re buying a house in a certain zip code. Don’t make your decision based on what is most appealing right now: bring a calculator to every meeting so you can figure out how each set of terms will affect your finances over the lifetime of your mortgage, and take the option that is most financially sound for you and your house long-term.
Mistake #4 – Choosing a House Before Pre-Approval
Though it seems to make sense to find a house you love first and worry about a lender to match the house later, you should probably consider doing things the other way around. Online mortgage calculators, like the one found at herringbank.com, can give you an estimate of what your budget will be. It is smart to get pre-approved for a mortgage that’s within your budget before you let yourself fall in love with a house that may be out of your range. Choosing a house first adds unnecessary and expensive delays to closing. You also run the risk that you will be denied a mortgage after you have already poured time, money, and energy into finding the perfect home. If you go into your house hunt journey knowing that you have a guaranteed mortgage available, then all you have to do is choose your home and close the sale.
If you have questions about the home buying or mortgage loan process, or feel ready to get pre-approved or apply for a loan, please call (855) 352-3772. A Herring Bank mortgage representative would be more than happy to assist you!