Buying a first home is a major milestone in a person’s life.
While this is supposed to be an exciting time, it is often fraught with undue stress. Do not let your lack of experience ruin what should be one of your proudest moments. Avoid these common mistakes and you will find that the first-time home buying experience really is a joyful time.
Consider Your Finances
Be realistic about your finances. There is more to owning a home than making monthly mortgage payments. You also have to consider property tax, insurance, HOA fees, increased utility bills, and maintenance. All of these are often overlooked when budgeting for a first home. To avoid this potential financial trap, talk with a mortgage lender before you start house hunting.
There are many government backed loans that offer special incentives to first-time home buyers. You can also look into a To Be Determined, or TBD loan. This type of approval process is based on your income, not on the value of the house. Getting approval will give you an excellent idea of how much house you can afford. Once you do have your approval from your lender, you can then budget in those additional expenses to give you a clear idea of the price range you should be looking in.
Avoid Emotional Buying Decisions
A first time home buyer may be overly excited about their imminent purchase, and tend to base their home buying decisions on emotions. This is a big financial decision you are about to make. Looking at homes before you know how much you can afford is a backwards approach. Get pre-qualified first with a TBD mortgage and you are going to make better choices for your future.
Working With a Real Estate Agent
Choosing a real estate agent you can count on is essential. While some people will try and avoid fees by dealing with listing agents themselves, this is a big mistake. Listing agents are contracted by the seller and will not have your best interest in mind. You need to have your own buying agent to help you negotiate price and terms.
How Much Down Payment Should You Make?
You may have been saving money for years in order to make a down payment on your first home. A big mistake a first time home buyer may make is using all of those pennies and not leaving any cash on hand. While this may help keep monthly mortgage payments down by eliminating PMI insurance, it won’t be worth it in the end if you suddenly need cash to fix a broken appliance in your new home. Talk with your lender about mortgage programs that offer little money down to first time home buyers as a part of their terms.
The last thing to remember during the home hunt is not to do any big shopping before your closing date. Some home buyers get excited and start going on furniture shopping sprees but this is a mistake. Lenders will sometimes do one last credit check before they close and if they see a sudden big change in your debt to income ratio they can deny the loan. Wait until all the paperwork is signed before starting to furnish your new home.
If you follow these few simple steps then you will quickly be on your way to home ownership. Call the Better Rate Mortgage Team at (314) 361-9979 to get you started.
Photo credit: Benjamin Reed via Flickr