Buying your first home is an exciting and scary process. It is easy to get swept up in the chaos of home shopping, but it also makes it easy to make mistakes. If you are purchasing a home for the first time or it has been more than a decade since you last bought one, keep these common mistakes in mind to avoid buyer’s remorse.
Applying for a mortgage after looking for a home
When you decide to take the plunge into homeownership or decide to move, you may want to hit the ground running. Unfortunately, looking at houses before applying for a mortgage can hold you back if your dream home hits the market, or if you have been looking at homes outside your budget.
The housing market is facing tight inventory and fierce competition at the moment. Getting pre-approval sends the message to sellers that you are a serious contender for their home.
Not shopping around
You will likely look at more than one home before choosing one, and you should do the same when picking a lender. The more you shop around for a mortgage, the better deal you are likely to get. An experienced mortgage loan officer can consider your financial situation and find the best loan for you.
Shop around to at least three lenders before making a decision. Be sure to compare lender fees, loan terms, and rates.
Buying too much house
Often, people stretch their budget thin for a home they fall in love with. But, overextending yourself can cause problems and regret later on. You could be at risk for losing your home or be forced to endure a tight budget for decades to come.
Shift your focus to a monthly payment you can afford instead of maxing out the loan amount you qualify for. Just because you are eligible for a loan does not mean you can comfortably afford the monthly payment of it. Consider other expenses that do not get factored into your credit report.
Moving too fast
One of the most common mistakes first-time homebuyers make is not planning far enough in advance. Rushing to buy a home does not give you enough time to save for a down payment and the other expenses associated with a mortgage like closing costs. You may also not have enough time to learn more about the process from your lender and realtor.
You should have a home-buying timeline mapped out for at least a year before you plan on buying. It can take months or even years to fix poor credit and save enough for a down payment. Work on improving your credit score, paying down debt, and saving more money to put yourself in a better position to get pre-approved.
Scraping together every last penny you have for the down payment and closing costs of a new home is not the best way to embark on a significant loan. While you will not have to pay for mortgage insurance if you put at least 20% down, you will be living on the edge without any savings to fall back on.
Strive to have three to six months worth of living expenses saved after your down payment and closing costs are paid. Mortgage insurance is not as big of a deal to pay for if it means having an emergency fund.
If you are ready to start house hunting, call Mortgage Makers. We will do the leg work for you and find the best rate you can qualify for and ensure you do not make the same mistakes as home buyers before.