10 Mistakes First-Time Homebuyers Make & How To Avoid Them
Buying your first home can be an incredibly exciting time. For the first time, you can begin building equity to help provide financial stability long into the future. Before you sign the mountain of paperwork that accompanies a home purchase, though, and even before you start to consider which types of homes you like, you need to gain some knowledge so that your buying process goes as smoothly as possible.
Specifically, it’s important to understand some of the mistakes that other first-time homebuyers make so that you don’t make the same ones. To give you a roadmap of what to avoid, here are ten mistakes that first-time homebuyers make and how you can avoid them.
1. Spending All Your Money
In order to get into a house as quickly as possible, it may seem like a good idea to spend most or all of your money on down payment and associated home-buying costs. However, draining your bank account for this purpose can leave you financially vulnerable when you run into unexpected costs in your new home. It’s better to take the time to build up your bank account to the point that a down payment won’t drain you dry.
2. Premature Shopping
Home-buying shows have made the process of buying a home seem more simple than it actually is. This can lead to the temptation to find a home you love before you know if you can actually afford that home or not. To keep your expectations realistic, it’s better to apply and get pre-approved for a mortgage so that you know approximately how much you have to spend. The good news is that mortgages for a first time homebuyer often come with favorable terms, meaning you can still afford a nice home.
3. Lack of Credit Knowledge
Your credit score can have a major effect on the mortgage rates you receive. Sometimes, a difference of a just few points can make a drastic difference in your APR. Therefore, to ensure you receive favorable rates, it’s important that you’re intimately familiar with the information on your credit report from all three credit reporting bureaus. You should also know that if you see mistakes in your reports, you have the right to dispute those mistakes to help improve your score.
4. Maxing Out Your Mortgage
When you’re pre-approved for a loan, the number that you’re given represents the maximum amount of money you can borrow under the best possible circumstances. Spending this entire amount on a home, though, can leave you with a mortgage payment that you can’t really afford. To prevent this, look for houses that are at least $10,000-15,000 below your maximum approved amount to ensure you have plenty of wiggle room.
5. Overlooking Your Options
When it comes to mortgages, it pays to shop around. In addition to comparing multiple lenders, it’s also important to look into whether or not you’re eligible for a government loan, such as a VA or USDA loan. In most cases, the first lender you apply with will not provide the best rate, so it’s important to take the extra time to ensure you’re getting the best deal.
6. Rushing Your Decision
If there are outside influences that are leading you to purchase a home, it can be easy to let the pressure of these influences cause you to make a rushed decision. Remember, though, that buying a home is a choice that will affect you for at least the next several years, if not decades. Therefore, take some time to clear your mind and take a look at objective data so that you can be sure that any decision you make on a home is one that you’ll be happy with for the long haul.
7. Forgetting The Importance of Location
As home flipping continues to gain in popularity, the rise of beautiful homes in less-than-desirable neighborhoods has become a common occurrence. Don’t allow yourself to be enchanted by a home without considering the surrounding area, though. In fact, to save yourself some grief and wasted time, try researching neighborhoods, or reach out to us at MEGG homes for some guidance.
8. Waiting Too Long
The idea of a 20-percent down payment is so ingrained in the first time homebuyer that it might as well be a law. However, this level of a down payment is nothing more than a suggestion. While it’s a wise suggestion that can potentially save you some money over the years, there are loans available with far lower down payments. By researching these loans, you may be able to get into a home from MEGG Homes more quickly than you thought.
9. Accepting Gifts
If a family member wants to give you some money to help with your down payment, make sure that your lender knows this in advance. To help prevent loans from one family member to another, lenders will closely scrutinize your bank accounts in the months following your home purchase. By signing the proper affidavits, though, you will face less scrutiny and suspicion from your lender.
10. Being Too Picky
Everyone has likes and dislikes when it comes to a home. If your list of “non-negotiables” is too long, though, you may never be able to find a home that makes you happy. By analyzing your wish list to find a few qualities that are most important, you’ll be able to expedite your home search and still find something you enjoy.
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Here at MEGG Homes, we all come to work every day because we feel passionate about providing our clients with a place to call home. Founded in 2011, our team strives to meet the needs of the ever-changing residential housing market by creating alternative solutions for home buying and selling. Take a look at the homes we currently have for sale in Polk County.