So, you’re looking to purchase a home for the first time. Congratulations – this is an exciting and monumental step to take! However, it’s one where you’ll need to exercise some caution to avoid common first-time home buyer mistakes. You can also check out our guide for first-time home buyers, as well as things you should do before moving into a new home.
Mistaking How Much You Can Afford
If you don’t know from the start how much you can afford, you’ll end up wasting time. Looking at houses you aren’t able to afford yet, or visiting houses that are below your optimal price level, can end up being tedious and even expensive – if you account for travel costs, having to take time off work, and more.
Not Getting More than One Rate Quote
Just like most purchases, you’ll want to shop around and compare offers. Mortgage interest rates can vary from lender to lender, as can discount points and closing costs. To get the full picture of what your options are, apply with multiple mortgage lenders – all applications made within a 45-day window will count as merely a single credit inquiry.
Not Checking Your Credit Reports
Mortgage lenders will take a close look at your credit reports when they decide to approve a loan or not. If your credit report has errors, you might end up getting quoted an interest rate that is higher than you deserve. Take your time checking your credit report and ensure that is accurate.
Making Too Small of a Down Payment
When it comes to down payments, the key is ensuring that the payment you make will end up in an affordable monthly house payment. Making too small of a down payment can seem financially viable at first, but it can end up troubling you in the long run.
Not Looking into Home Buyer Programs for First-Timers
If you’re a first-time buyer, there are first-time home buyer programs that you can explore. These include state programs that help with down payments and competitive mortgage rates offered specifically for first-time buyers. You might also be able to qualify for a loan guaranteed by the Department of Veteran Affairs, or the U.S. Department of Agriculture, so fully explore your options.
Underestimating Home Ownership Costs
Purchasing a home means more monthly bills. Added to your mortgage are oil bills, gas bills, cable bills and more. While renters do foot these bills, new homes tend to have higher costs than rental properties, and things like homeowner association fees can also add to your expenses. Not considering the full financial scope of owning a home is a common mistake for first-time home buyers.
Miscalculating Renovation and Repair Costs
When performing your financial projections, assume that you will have to spend some money each year on renovation and repairs, and be generous with that amount. As you can see, being unaware of the full financial scope of owning a home accounts for many of the mistakes that first-time home buyers make.
