The best way to ensure that your first homebuying experience goes as smoothly as possible is to learn from the mistakes that previous first-time homebuyers have made. The mortgage specialists of Bank of Internet USA have compiled a list of some of the most common mistakes of first-time homebuyers so that you know some of the pitfalls to avoid as you take your initial steps in the home purchase process.
The most common mistakes that first-time homebuyers make include:
1. Not Creating a Budget
It’s important not only to establish a budget, but also to be as realistic and thorough as possible when you do so before you start looking to buy a house. Make an exhaustive list of all your monthly expenses, excluding your rent, and then add in the major costs that may only occur once or twice a year, such as insurance premiums, holiday and birthday gifts, and trips. Once you subtract that amount from your take-home pay, you’ll have a good idea of what you can afford. Now, be careful not to look outside of that price range, or you could end up falling in love with a house that you cannot afford and should not buy.
The other real advantage of creating a realistic budget is that you may discover that you cannot find a home you’ll be happy with that falls within your budget. Then you can make a plan to lower your debt and reduce your spending before you resume looking for your first home.
2. Failing to Check Your Credit
There are many highly reliable adults who pay their bills on time who have checkered financial pasts for one reason or another. Perhaps there was a medical emergency or divorce that made it hard for them to keep up with their financial obligations. Some people simply need a few more years than others to become fiscally responsible.
Whatever the case, past financial problems can affect a person's credit for years, so it is wise to check your credit report early in the home buying process. There may be mistakes you can correct, or even steps you can take to repair your credit before applying for a mortgage. This is important because that three-digit score can really affect the kind of mortgage loan a first-time homebuyer is able to get, regardless of that person's budget.
3. Skipping Mortgage Pre-approval
The mortgage pre-approval stage is essential to your peace of mind as you shop for your first home. Again, you may think you are able to afford a certain mortgage payment each month after reviewing your budget; however, this may not be the amount you are able to acquire through a home loan. With a mortgage pre-approval, you will have a very good idea of the home you will be able to afford.
After you contact Bank of Internet USA for a home loan quote, you will receive a mortgage prequalification letter along with a request for documentation giving evidence of your finances. By providing us with the proper documentation, such as proof of debt and income, tax info, and credit reports, we will potentially be able to pre-approve you for a specific loan amount. This will give you a highly accurate picture of how much you can spend on a home, as well as what your monthly mortgage payments will be depending on what you ultimately spend. First-time home buying with a mortgage pre-approval will give you the confidence you need to find the right property for you and make a solid offer when the time comes.
4. Blindly Following the Advice of Your Real Estate Agent
While real estate agents play vital roles in the home buying process on behalf of both buyers and sellers, and it’s not advisable to go without one, you still need to do your own due diligence. Make sure to make your own pros-and-cons list, run the numbers, and be as objective as possible as you consider the facts about the homes you view.
Often real estate agents and homeowners use marketing strategies to pitch their properties. Sometimes even the homebuyer's real estate agent will use such a strategy if he or she is eager to close a deal and make a commission. But remember, it’s you who has to live in and pay for the home for years to come, so if something doesn’t feel right to you, trust your instincts above all else.
5. Falling in Love with a Home
Falling in love can be one of life’s great adventures. But when it comes to first-time home buying, it can be a fatal error. Falling in love with a home during the house hunting process puts you at risk of ignoring objective facts and the good advice of your real estate agent. As a result, you may end up making emotional rather than rational decisions, something you don't want to do when signing a legally binding, life-changing contract.
Don't find yourself ignoring important red flags such as a leaky roof or moldy basement just because you’ve fallen under the spell of other charms the house has to offer.
6. Not Knowing Your Deal Breakers
Although you don’t want to buy your first home based solely on emotion, you also don’t want to focus entirely on practical matters. Otherwise, you may end up sacrificing something truly important to the quality of your life in your new home. A good way to avoid this is to make a list of deal breakers: elements in a home that may not be essential to everyone but are definitely essential to you and your happiness.
Let's say that you love to cook and you do it often. Obviously, you won’t be happy in a house with a cramped kitchen or outdated appliances. Likewise, if you're proud of your extensive wardrobe, you won't want to lock yourself into a home with insufficient closet space just because it has new plumbing. With a list of deal breakers, both you and your real estate agent will be far better prepared to find the house that is right for you.
7. Visiting the Property Only Once
While it is possible that the first house you visit will actually be the right one for you, you should still visit the house a few times before submitting an offer. Once you sign the closing papers, there’s no room for buyer's remorse. You cannot ask for a refund if you get into a home and realize there are noisy neighbors who just started a band or an unpleasant aroma when the wind changes course.
Visiting a property multiple times, and at different times of day, can help you make a confident, informed decision as to whether you should purchase a particular home.
8. Making an Offer before Doing a Home Inspection
A professional home inspection can reveal all sorts of things you might not have been able to detect, even after multiple visits to the property. Before you make a decision and set your hopes on purchasing a home, have a home inspection performed and consider the results carefully. You don’t want to get stuck with repairs that will turn a good deal into a financial burden.
9. Not Shopping Around for a Mortgage
Before committing to your first home loan, be sure to speak with different mortgage lenders. Interest rates and closing costs vary, so if you want the best rates and most favorable terms, get more than one mortgage quote (you can use the form on this page to get a rate quote from us).
Does this mean that you should contact a dozen different banks to shop for the best mortgage rate? Not at all. But it is wise to get at least three no-obligation home loan quotes so that you can compare them and determine the best mortgage option for you. Consider such factors as mortgage rates, closing costs, down payment, whether private mortgage insurance is required, and a potential prepayment penalty.
10. Waiting Too Long to Act
While it’s important to compare lenders before committing to your first mortgage, it is also unwise to wait too long before you sign those papers in the hopes of interest rates going down. While you are waiting for savings that may end up being negligible or non-existent, the house that's right for you could end up becoming someone else's home.