Buying your first home comes with many big decisions. It’s easy to get swept up in the excitement and make some rookie mistakes. Here are five first-time homebuying mistakes that you can easily avoid!
Get pre-approved before shopping around
It may be more fun to look at homes than to talk about your finances but looking at properties before determining how much you can borrow can lead to disappointment. Once you’re ready to start your journey to homeownership, we recommend talking to a Loan Consultant about getting pre-approved before you seriously start looking at homes.
Don’t make any big purchases
Most mortgage lenders will check your credit during the pre-approval and again just before closing to ensure that your credit is still in good standing. In the meantime, you must maintain your credit and your finances throughout the entire homebuying process. That means no new lines of credit, no closing existing accounts, and no large purchases on your existing credit accounts until after you close on your new home.
Don’t stretch your budget
As a new homeowner, you will need to budget for more than just your monthly mortgage payment. Other potential expenses may include property taxes, mortgage insurance, homeowner’s insurance, HOA fees, additional hazard insurance, utilities, maintenance and repairs. It’s easy to fall in love with a home that might stretch your budget but overextending your finances could put you in a tough spot down the road.
Don’t wait to save 20% down
While a 20 percent down-payment will help you avoid mortgage insurance, many first-time homebuyers don’t have that much money to put down. According to the National Association of Realtors, in 2019 the median down-payment for first-time homebuyers was 6 percent! There are several loan types that offer as little as zero to 3 percent down, so don’t hesitate to speak with a Loan Consultant to discuss which home loan works best for you.
Check your credit report for mistakes
Your credit report will be crucial when it comes to getting approved for a mortgage with the best interest rate. We recommend ordering a free copy of your annual credit report to make sure everything looks accurate. Errors on these reports are more common than you think! Confirm that your name, addresses and employers are all correct and look out for any accounts you don’t recognize, incorrect balances or negative account information that is more than seven years old. If you happen to find a mistake, the three major credit reporting companies provide instructions for filing a dispute online: Equifax, Experian and TransUnion.