Like most things, buying a home as a first-time buyer has its ups and downs.
In this day and age, home prices are reaching record highs in many parts of the country, often selling for a lot more than what the buyer is asking.
In other words, this is a fast and competitive market that isn’t for all buyers. You’ve got to move fast if you find the home of your dreams.
So, if you are a first-time buyer here are 7 tips to avoid making common mistakes when buying a home:
1.Will You Get Approved for a Mortgage?
Typically, you’d like to have little to no debt, a great credit score, and a 20% down payment before borrowing money for a home. However, even borrowers with less may be able to get a loan in today’s market, thanks to options including the Federal Housing Authority loans, which are designed to assist low-income and first-time buyers.
2.Interview a Single Lender
The fees and rates offered by lenders may vary, and all offer different service levels, as well as different loan products. Do talk with at least one larger bank, a regional bank or credit union, and an online lender.
3.Get Pre-Approved Before
Getting pre-approved for a mortgage serves an important process in the home buying arena: One it gives a realistic understanding of how much you can spend on a house. Two, it shows sellers that you’re serious and gives you more standing if you’re competing for homes with all-cash buyers. Also, it may make the overall experience less stressful by prepping relevant financial documents like bank statements, tax returns, and pay stubs, as well as checking your credit report for errors in advance.
4.Maxing Out the Mortgage Limit
Just because a lender says that you can borrow a certain amount, doesn’t necessarily mean you should borrow that amount. Staying below the limit may give you more financial flexibility to cover all those added expenses that typically come when buying a home, as well as long-term changes to your income. Do create a budget that includes how much money you can spend on housing costs each month, and then use those numbers to realize what your “real” limit should be.
5.Emotions Run High Making Decisions
Buying a home can be a long and harrowing process. Starter homes tend to move quickly, and it’s typical for first-time buyers to experience rejection right from the start. It’s easy to fall in love with a house that’s way out of your set budget, or find yourself in bidding war. You could also end up paying more than you prepared for.
6.Waiving Contingencies Without Knowing Risks
In competitive markets, it’s not unusual for buyers to make offers that aren’t contingent on financing or inspection. While waiving contingencies could make your bid more desirable to a seller, it can also make the transaction that much more risky for you. Talk with your Realtor or sales agent, as well as a lawyer before opting out of contingencies in your contract. The worst thing that might happen? You could end up losing your deposit.
7.Don’t Let Your Credit Score Change Before Closing
A pre-approval letter is not always a guarantee of funding, and if your credit score or income levels change between the pre-approval and the closing of the loan, lenders may change their terms or take back the offer completely. While you’re home shopping, be sure to pay all your bills on time and stay away from new credit accounts, even if that means you have to wait to pick out appliances, furnishings and other home-related items. If possible, try not to change jobs until after you close, especially if you’re moving into a completely new industry.
The home buying process can certainly be frustrating and time consuming, but it can also be very rewarding in the end especially if you can call the house you just bought “home sweet home.”
Go in knowing all of the facts, and be prepared for the unexpected. Additionally, hire a professional Realtor to walk you through the home buying process that will assuredly have many ups and downs before you potentially sign on the dotted line.