Buying a home is an exciting time in your life. It signifies a new chapter, whether you’re starting a family or just moving to a bigger space. However, for many new homeowners, it can be a stressful task. Here are some of the common mistakes they make and how to avoid them.
1. Not Figuring Out How Much They Can Afford First
Many homeowners get swept up in finding their dream home. They may focus on the features of the house and then figure out pricing. However, determining how much you can afford is a critical first step, saving you time and stress. You want to find a house with an affordable monthly payment that won’t stretch your bank account.
Use a mortgage affordability calculator to determine the right pricing range for you. Most reputable finance publishers offer this tool for free, it can be a great way to plan your budget. Factors such as your income, debt, and credit score will impact how much you can spend.
2. Only Getting One Mortgage Rate Quote
When shopping for a mortgage, you want to compare offers. Keep in mind you don’t want to jump on the first one just because you’re excited to move in. The interest rates will vary between lenders, so you want to find the best deal.
So, apply with multiple mortgage lenders. Reach out to your local bank or mortgage brokers in the area to compare rates. The size of the loan and the interest rates are the most important factors to pay attention to. Also, consider if you have enough money for the down payment and the origination fees.
3. Not Checking Their Credit Score
Lenders will review your credit score before approving your loan. Your score can influence your eligibility for the loan and the price of the interest rate. If your credit report comes back with errors, it could raise your interest rates.
Before buying a house, make sure you request a free credit report. You can request a copy through Annualcreditreport.com. Pay on your bills time and consolidate any debts to improve your credit score. Consider setting up payment reminders through your calendar or an app.
4. Trying to Perfectly Time the Market
Some new homeowners assume they can follow market trends. However, they often don’t have the right tools to do this effectively. Also, people simply underestimate the unpredictability of it. One of the factors that lead to the volatility of the market is supply and demand. For example, during the pandemic, the need for housing increased. Yet, the supply of available properties was limited, causing prices to rise.
So instead of trying to figure things out on your own, consult a professional. Real estate agents and financial planners have tools and are up to date on current trends. You can also do some research to figure out the present market condition.
If the demand is low and the supply is high, you’re in a buyer’s market. Signs of this may include low home prices and fewer buyers. On the other hand, if there is more demand than supply, you’re in a seller’s market. Keep in mind these conditions can change over time.
5. Not Making a Large Enough down Payment
While it may be safer to spend less on a downpayment, it may lead to issues down the road. You should try to put down at least 20% for the payment. With a higher down payment, you have lower interest rates and fees, saving you money down the line. It can also start you out with more equity, which protects you if the value of your home drops. However, how much you put down is up to you.
Keep in mind you still want to be able to afford your monthly expenses. First, determine how much you can afford to pay. Look up your recent savings and investment statements for an accurate number. In addition, set aside money for emergencies and the closing costs. Then explore all your loan options by talking to multiple lenders.
Common Mistakes First Time Home Buyers Make
When it comes to purchasing a home, you have a lot to think about. You want to find one that has all the right amenities at an affordable cost. As you start your search, keep these mistakes in mind, so you can successfully find your dream home.