Buying your first home is a big deal. It should be a positive, exciting adventure that generates good feelings about your home and your future there. Unfortunately, some novice buyers jump in blindly and blunder badly, turning their path to homeownership into a stressful, nightmarish experience. How do you dodge the common first-time home buyer mistakes that tend to trip people up? Your best bet is to simply learn about these common missteps and the strategies that will help you avoid them.
Dodging Common First-Time Home Buyer Mistakes
According to the National Association of Realtors’ annual Profile of Home Buyers and Sellers, first-time buyers made up 33 percent of all home buyers in 2018. Although trial and error can be great teachers when you’re learning something new, the lessons that they teach can be very costly if you apply that approach to buying a home. What are some frequent first-time home buyer mistakes? More importantly, how do you avoid making them?
Mistake 1: Not Being Proactive About Your Credit
Do you know what your credit score is? If you’re planning to buy a home, you should. As Credit.com indicates, your credit score has a major impact on the terms and conditions of your home loan. A higher credit score can do more than increase your odds of being approved for a home loan; it can also help you score a lower interest rate, saving you thousands of dollars over the life of your mortgage. Be proactive about your credit. Request copies of your credit reports and review them carefully. If you spot any errors, reach out to the credit bureaus to get them corrected. What if your credit score is lower than you want it to be? Take the appropriate steps to repair it before starting a serious search for a home loan.
Mistake 2: Misjudging the Down Payment Requirements
Do you think you need a down payment of 20 percent to buy a house? Think again! While this information is often repeated, it’s actually a myth. Making a sizeable down payment does have advantages – like reducing the amount that you’ll need to borrow, winning favor with lenders, and helping you sidestep the requirement for private mortgage insurance – but it’s not a necessity. As Zillow reports, there are a variety of home loan products that don’t demand a hefty down payment:
- VA loans require no down payment.
- USDA loans require no down payment.
- FHA loans are available with a down payment as low as 3.5 percent.
- Conventional loans are available, for those that qualify, and require a down payment of 3 percent.
Mistake 3: Shopping for the House Before the Mortgage
If you want to buy a house, you should attend open houses and visit properties, right? Touring potential purchases is certainly wise, but there’s something else that you need to do first: shop for a mortgage. As NerdWallet explains, talking with a lender to learn more about your financing options and to discover how much you’ll be able to borrow allows you to focus your time and attention on properties that are in your price range. As an added bonus, being prequalified or preapproved by a lender adds more weight to any offer that you do make because it demonstrates to sellers that you are a serious buyer with the means to back up your offer.
Mistake 4: Getting a Mortgage That You Don’t Fully Understand
Mortgages come in an impressive array of shapes and sizes. As The Motley Fool points out, this is both a blessing and a curse. On the plus side, this means that there is a loan product that’s perfect for almost any home buyer. Unfortunately this also means that you’ll have to pay attention and do your homework.
Don’t assume anything. Ask lots of questions. Research how mortgages work to get a solid grasp of loan basics so that you know what to ask. Read the terms of any loan that you’re considering carefully and be sure that you understand them. Choose a reputable lender who offers excellent customer service and will help you understand all of your options. Your loan officer should be ready to provide expert guidance and clear, concise, and accurate information so that you truly comprehend your choices and their respective pros and cons. This will help you avoid costly misunderstandings.
For nearly 30 years, people have counted on PrimeLending for help in achieving their goals of homeownership. Whether you’re buying your first home or your fifth, the expert team of loan professionals at PrimeLending Kansas City is ready to assist you. With our stellar loan process, firm commitment to friendly, personalized service, in-depth knowledge of the local housing market, competitive rates and fees, and speedy turnaround, we can help you find the right loan for your unique situation. To discover more about our services, contact us today.