Last Updated on May 20, 2021 by MoneyVisual
Buying your first home is a big decision indeed! It’s easy to get trapped in stress while home shopping and make mistakes that may leave you with buyer’s remorse. Unless you do a lot of research, buying a property is a confusing, and overwhelming process.
So, if you are a first-time homebuyer, it’s crucial to stay clear of these common pitfalls and prepare for the home buying journey-
Starting the Search Before Applying for a Mortgage
Many of the first-time homebuyers commit the mistake of looking for a home before even seeing a mortgage lender. However, keep in mind that the housing inventory is still tight in some markets. And, in this competitive market, it’s easy to lose the property if you have not been approved for a mortgage beforehand. If the house you love hits the market, you may get behind the ball.
Besides, many homebuyers wait until they find a home before talking to a lender. However, before you fall in love with your dream house, getting a written pre-approval is beneficial. Pre-approval shows that you are a serious buyer who’s credits and finances are satisfactory to be eligible for a loan.
Settling for the First and the Only Lender You Talked To
As a first time homebuyer, it’s pretty easy for you to get a loan from the first lender or bank you talk to. However, if you don’t explore the options or settle with the only lender you talked to, you may end up leaving thousands of dollars on the table.
If you have a good mortgage broker by your side, he will study your situation and diagnose any potential barriers to provide you with better home-buying options.
So, the more you shop around, the better comparison you’ll have to get a good deal at the most affordable price. Negotiate with at least, three lenders and mortgage brokers. Compare their rates, loan terms, policies or lender fees.
Overstretching Your Budget to Buy a Home
It’s easy to fall for the homes that cost you big bucks. But, exceeding your budget isn’t a wise thought. It may put you at risk of losing the home if you later get into tough financial times. Just because you got qualified for a $500,000 loan, it doesn’t imply you can afford the monthly payments coming with it. So, get clear on what monthly payment you can afford instead of fixating on the maximum loan amount.
Ignoring Down Payment Assistance Programs
Saving for a down payment seems to be the biggest hurdle for first-time homebuyers. Further, there is a common belief that it is necessary to put at least a 20% down payment. However, the truth is you not necessarily require that large down payment to buy a home.
If you delay your home purchase to save up to 20%, it may take years! Or, you may even limit your cash flow that can be put to better use. To avoid this, consider multiple mortgage options that cater to the needs of first-time buyers.
You can check with your state housing programs to check if you qualify for housing assistance programs that are designed for first-time buyers. These programs offer second to third mortgages or grants for 0% interest rates or deferred payments.
Making Emotional Decisions
Not to mention, buying a house is a big milestone of everyone’s life. So, it’s pretty easy to get attached to a house and make emotional decisions in haste. With this in mind, many of the first time homebuyers bid over what they find comfortable, as it’s taking longer to find a home.
However, emotional decisions can lead to overpaying for a home. Be realistic, and don’t get attached to a building that isn’t yours. Fix a budget and stick to it.
Skipping the House Inspection
It is something not every first-time homebuyer knows about and may forget. The reason is, you see the property and nothing seems to be wrong. However, professional home inspectors observe the things we don’t. So, this part is exceptionally important if you are buying an existing home. It helps you negotiate with the current owner to fix the repair issues and adjust the price accordingly.
Not Paying Attention to the Credits
Moneylenders pull the credit reports at the pre-approval to ensure that nothing is changed in your financial picture. Any new credit card accounts or loans can put the final loan approval in danger. As a first time buyer, learn this lesson the hard way. Avoid opening new credit cards, taking out new loans, or making big purchases on the existing credit account. Pay all your bills on time and in full regularly. Update the status of your finances.