When it comes to purchasing your first home, there are a lot of huge and considerable decisions that you should make, which can be, for the most part, exciting and scary. It is rather easy to get confused with tons of properties available out there, and make significant mistakes that could, like it or not, end up with buyer’s remorse over time.
Of course, you aim, as a homebuyer, is to acquire a home that you and your family will love at a fraction of cost. However, a lot of people do things that restrict and limit them from reaching their desires.
But the good news is that you can have a less stressful and much smoother homebuying experience by avoiding some common mistakes. Keep in mind that knowledge is power, especially for those first-time homebuyers. For a little help, here are five common mistakes that first-time homebuyers make and how you can avoid such mistakes.
Having the Wrong Impression of What You Can Afford
In a nutshell, what you know you can afford and what the bank says you can manage are not, believe it or not, the same. If you do not have a budget, then see to it that you create a list of all your expenses (on a monthly basis), excluding rent.
Also, remember that significant expenses only happen at least once a year — for instance, annual vacations or annual insurance payments. Get the total and subtract all of this to your income and you will, without a doubt, know how much money you’ll spend on your new property monthly. It will provide you with an estimate of what your mortgage payments will be.
Afterward, adjust your home options according to what you can afford. Don’t look at properties that are beyond your financial range because it could put you in a bad position. So, know what you can afford to know what size or type of home you should be looking for.
Scouting for a Property Before Getting a Mortgage
Most of the time, first-time homebuyers make the lapse of looking for a home before even applying for a mortgage or contacting a mortgage lender. This mistake will, for the most part, put you off the pace if a property strikes the market you desire, or you view properties that you cannot afford.
In large markets, inventory of homes is tense, and the competition is intense. As such, you may find yourself stretching your budget to purchase a home or get deprived of a home you are not, more often than not, approved for a mortgage.
So what should you do instead? Before you check out and inspect your dream property, be sure to apply for a mortgage first. There are a lot of mortgage companies such as Annapolis Mortgage Group that can help you get an underwritten approval. Getting a mortgage beforehand means that you are serious homebuyer whose finances and credits satisfy requirements to get a loan.
Conversing to One Lender
One of the biggest mistakes most first-time homebuyers make is talking to and conversing to only one lender. Most of the time, first-time property buyers get a mortgage from the first bank or lender they speak to, conceivably paying more and more money.
To avoid making such a mistake, do shop around because you will get a much better justification for comparison, which will then lead you to get an excellent and affordable deal. Keep in mind that a great mortgage loan officer can inspect your current situation and pinpoint problems ahead to offer you a much clearer understanding of your options.
So here’s what you should do instead. Talk to at least three different banks or lenders, and a mortgage broker. Compare the loan terms, lender fees, and rates. Most importantly, do not treat lender responsiveness and customer service as insignificant. Remember that both factors play significant roles in shaping the process smoothly.
Exhausting Your Savings
Another huge mistake most first-time homebuyers make is draining and spending most of their savings on the closing costs and down payment. Most homebuyers, especially the first-timers, drain all their cash to make at least 20% down payment so that they won’t have to compensate for mortgage insurance. However, they are taking the wrong path and are, like it or not, left with no savings.
Here’s what you can do instead. Focus on putting at least six months of expenses in an emergency fund. It is not ideal to pay mortgage insurance and drain all of your savings. It is not worthy to live on the edge.
Ignoring the Future
Although it is beyond the bounds of possibility to completely foresee the future of your pegged neighborhood, diagnosing and knowing the available information to you now can aid you in avoiding undesirable surprises that might occur.
So, what questions should you ask about your chosen property? Here are a few:
- What are the development plans for your area?
- Will your street become a major or short-cut street?
- Will there be bridges or highways in the works?
- What are the zoning laws in your state?
- Are the home values been declining?
Purchasing your first home can be an overwhelming and stressful process, and it is not something without potential pitfalls. But if you know and understand those common mistakes ahead, you can secure yourself from damaging mistakes and buy a home with confidence. For the most part, a home is the biggest purchase one can ever make, but it doesn’t need to be the most complicated.