When it comes to purchasing your first home, the excitement can take hold. It can feel all too surreal to even think about owning your home. However, many first-time buyers make mistakes that are easy to avoid. So, we are going to check out the mistakes first-time buyers make and how to avoid them.
Searching For a Home Before Securing a Mortgage
Many first-time buyers choose to look for a home before securing their mortgage. Some will even make an offer, only to be disappointed when they discover that they cannot afford it. Don’t waste time looking for the wrong homes if you don’t know what you can borrow. It wastes your time and vendor time too.
So, before you begin looking for homes and falling in love with properties, it makes sense to ensure that you have a mortgage approved.
They Only Speak With One Lender
First-time buyers can seem too keen to begin looking. They then rush and get a mortgage from the first lender they communicate come across. Therefore, they could be selling themselves short and even lose money at the same time. If you look around and compare, then you might find better deals and rates. Therefore, aim to compare three lenders and attempt to get quotes on the same day as rates change quickly.
Purchase A Home They Cannot Afford
It’s all too easy to purchase a home that you love and a home that pushes your budget to its limits. However, choosing to go too far is never a good idea as it makes sense to stick as close to your budget as possible. If you buy a home that you cannot afford, you will have to make cuts elsewhere while you might find that you cannot make those all-important payments. So, it’s crucial to identify how much you can afford instead of looking at the amount you can borrow. If you can borrow $400,000, it doesn’t mean you can afford the repayments. So it pays to do your research.
First-time Buyers Rush
As they are keen to get into their new home, they tend to rush. It could prove costly further down the line. Many fail to plan, and that causes problems. When you go rushing into things, you might not save enough for closing costs or enough for a down payment. Therefore, it makes sense to look at the home buying timeline in advance because it can take a lot of time to solve problems like saving money and even repairing your poor credit rating.
Use all Their Savings
It can be too tempting to use all of your savings on your down payment, and this is a mistake that many first-time buyers make. Sure, it makes sense to pay as much as possible, and some do this to avoid paying mortgage insurance. However, all this does is leave people without any savings. The right thing to do is aim to have around six months’ worth of living expenses saved after you close. Covering the cost of mortgage insurance isn’t ideal, but using all of your savings will leave you in a precarious position should an emergency arise.
A Lack of Attention to Credit
A mortgage lender will delve into your credit report when applying for a mortgage, and they will ensure that everything is in place before closing. They will also check that your financial position hasn’t changed. If you take out new loans or credit cards, then this could prevent you from getting approval. So, try to keep your finances as they are from the moment you get your preapproval through to closing. Avoid loans and credit cards as this could cause problems when it comes to obtaining a mortgage.
Emotions Cloud Decision Making
Purchasing a home is a big decision and one that you have to get right. It’s where you will put down roots and create memories. However, it can be too easy to become too attached to a home and then make decisions based on emotions. With this approach, you might overpay for a home or push your budget. You should pick a budget and stick to it while avoiding falling in love with a home that’s not yours.
Assume a 20 Percent Down Payment is Required
There is a myth that you must put down a 20% down payment. It will help avoid paying for mortgage insurance, but some buyers don’t want to put down this much or cannot afford to. The average down payment is around 12% and even drops down to 6% for first-time buyers.
If you delay purchasing your first home because you want to save up to 20%, other financial goals might not be possible. It includes making the most of your retirement savings or even increasing your emergency fund. It makes sense to look at your mortgage options as some will enable you to put down a payment of 3%.
Looking for the Perfect Home
Everyone wants the perfect home, but they rarely exist. Everyone has a list of things they would like in their home, but ticking every box is almost impossible. Taking this approach could result in you missing out on the right home. It is likely to limit your search and could even result in your overpaying. So, keep an open mind and see what’s on the market but prepare to work hard when looking.
Not Understanding the Costs of Owning a Home
If you want to own a home, you need to be able to afford to run it. The price you pay for a home is just the beginning, but many first-time buyers fail to look at the other costs. It can include property taxes, mortgage insurance, repairs and maintenance as well as utilities. If you don’t have enough to cover these costs, then it could leave you in trouble. Therefore, it makes sense to crunch numbers and work out the costs to ensure your monthly income can cover the cost of bills.
It doesn’t matter whether you are a first-time buyer or you are looking for Homes For sale in Alexandria MN each element of purchasing or selling a home is crucial, and that’s why it makes sense to do your research and make the right decisions.