Are you in the market for a new home? If so, you’ll want to ensure that you avoid these common mistakes first-time homebuyers make. By learning what to watch out for, you can save yourself time and money down the road. Let’s look at some of the people’s most common mistakes when buying their first home.
1- Being Unable to Figure Out How Much House You Can Afford
This is perhaps the most common mistake first-time homebuyers make. They either underestimate how much a house costs or overestimate their income and end up unable to make ends meet. The best way to avoid this is by getting pre-approved for a mortgage and working with a real estate agent who can help you find homes in your price range.
2- Only Getting One Rate
It is common for first-time homebuyers only to get one rate when shopping for a mortgage. This can be a mistake because it doesn’t give you the full picture of what’s available to you. be sure to get multiple quotes to compare rates and find the best deal possible.
3- Not Checking Credit Reports and Correcting Mishaps
When buying a house, your credit score will come into play. If you have a low credit score, it could mean that you’ll pay a higher interest rate on your mortgage. So, before you start house hunting, be sure to check your credit report and correct any errors that may be dragging down your score.
4- Making a Small Down Payment
To avoid private mortgage insurance, you don’t need to put 20% down on a home. You can put down as little as 3% and still get a conventional loan. However, putting less than 20% down will likely mean you’ll pay a higher interest rate. Plus, you’ll have to pay for private mortgage insurance, which is an additional monthly cost.
5- Discrediting First-Time Home Buyer Programs
As a first-time homebuyer, you may be eligible for special programs that offer down payment assistance or lower interest rates. Don’t discount these programs because you think you make too much money. It’s always worth checking to see if you qualify.
6- Not Knowing Whether to Pay Discount Points
Mortgage discount points are prepaid interest that can lower your interest rate. They’re an upfront fee that you pay in exchange for a lower rate. Whether or not paying discount points makes sense depends on how long you plan to stay in your home and how much cash you have available.
7- Emptying Your Savings
When making a major purchase, it’s tempting to empty your savings account to generate a down payment. However, this isn’t always the best idea. You never know when you might need that cash for an emergency, so it’s always best to keep some in the bank.
8- Seeking Credit Before the Sale is Finalized
Once your home purchase is finalized, the lender will run a hard credit check. If you’ve applied for any new lines of credit or loans in the meantime, it could negatively impact your loan. So, avoid seeking any new credit until after you’ve closed on your home.
By avoiding these mistakes, you can make the home-buying process much smoother. Just be sure to research and work with an experienced professional to help you through the process.