1. Shopping for homes before knowing what you can afford.
Don’t waste your time shopping for homes before you know what you can afford. You should first get a pre-qualification, if not a pre-approval, before going out on your first showings with your agent. For many first-time home buyers, it’s important to first determine a comfortable monthly payment and then decide an optimal home price from there. Sometimes, buyers are pre-qualified for more than they are comfortable spending on a monthly basis.
2. Using all of your savings for the down payment.
Many home buyers focus on saving for the down payment on a house, which can range from 3% to 20%+, depending on what loan program you choose. What home buyers need to remember, though, is that there are additional costs associated with buying a house. These costs can add up quickly… Moving costs, closing costs, and costs for repairs or improvements that may arise in the first year. Make sure you have a financial cushion for these costs, and avoid using all of your savings for the down payment.
3. Focusing on the cosmetic details of a home.
It’s easy to remove wallpaper and repaint walls… not-so-easy to repair structural damage. During a showing or open house, it can be hard to look past someone else’s furniture and decor, but try to focus on the bones of the house and not the things that are easy to change. You might just find the perfect home underneath!
4. Not checking your credit report and making fixes.
Mortgage lenders will look at your credit report when determining whether to approve you for a mortgage, and in deciding what your interest rate should be. Checking your credit report annually (the three main credit bureaus each offer annual free credit reports) and disputing any incorrect charges can ensure that you aren’t quoted an interest rate higher than what you should get.
5. Not understanding the various programs available.
VA loans (for veterans, guaranteed by the U.S. Department of Veterans Affairs and allowing for zero percent down), FHA loans (from the Federal Housing Administration, allowing for a down payment as low as 3.5% of the home’s purchase price), and USDA loans (allowing zero percent down for homes in areas designated to be rural by the U.S. Department of Agriculture) are just three of the programs available for home buyers.
By avoiding these 5 common first-time home buyer mistakes, you will be well on your way to the perfect home buying experience!