There are mistakes you should avoid If you are a first-time homebuyer. It’s easy to get excited and rush the process, but it’s important to do your research. You wouldn’t want to regret your decisions later on. Here are five home buyer mistakes you should avoid.
1. Not Shopping Around for Mortgage Lenders
It’s pretty common that a first time home buyer follows through with the first company they speak to. By doing this, you’d be missing out on potentially lower rates and better client experience provided by other lenders. Shop around and compare rates, fees, and the terms of each loan. Also, you’ll want to find a balance between customer service and loan rates. It wouldn’t be wise to go with a company that has a one-star review but has the lowest rates. You’ll want to go with a company with great customer service and quick turnaround time. Keep that in mind while shopping for lenders.
2. Being Careless with Your Credit
It’s not a secret that lenders pull your credit during preapproval. This is to make sure everything checks out before they move forward with your loan and the closing process. Your financial profile has a huge impact on your approval. When you are ready to start house hunting, You don’t want to be applying for new credit cards, closing any of your accounts, or taking out other personal loans. Doing so can have a negative impact on your credit. In the time leading up to your mortgage transaction, keep your credit usage below 30% and be sure to pay all bills on time. This will ensure healthier credit when it comes time for your mortgage.
3. Looking for a Home Before Applying for Mortgages
The housing market is extremely competitive. Especially when inventory is low. If you haven’t been preapproved, you could potentially lose the dream house you wanted. Being preapproved offers a competitive advantage over other buyer offers. In short, don’t set on a dream home before shopping around for a mortgage lender. Take the opportunity to have an upper hand over other offers and win your dream home.
4. Exhausting Your Savings Account
Buying a home is likely the biggest investment you’ll have made as a first-time home buyer, but that doesn’t mean you should drain your savings. Many buyers try to aim to pay 20% down to avoid paying the added cost of mortgage insurance. The best thing you can do is make sure you are in a comfortable position to not only pay money down but also have cash to spare. One good tip is to have at least three or more months of living expenses saved even after your mortgage transaction. This way, you will be in a more comfortable position after closing.
5. Not Looking Into the Neighborhood
It’s easy to fixate on a house that seems to have almost everything you want, but you should never overlook the neighborhood it’s in. The right community is critical to your life and, in some cases, your growing family. You want to be in a community that matches the ideal culture you have in mind. Remember, you can always renovate a home, but you can’t change the location it’s in. Ask your agent to select areas with high safety ratings. If you have children, or plan to, be sure to look at school ratings in that district as well. Visit the neighborhood yourself and see how you feel about it.
When you are a first-time home buyer, it’s easy to make common mistakes. If you’d like extra help navigating the home buying process, you can check out our FAQ page. You can get creative with how you choose to utilize the cash from this type of refinancing. However, you want to make sure you think strategically about your situation and consider all your options in order to maximize the benefits. Picking the best mortgage lending partner possible can make the difference.
To read more about common mistakes first-time home buyers make, click here.