It is without a doubt that buying a new home, especially your first home, is very exciting. However, if not careful, you can find yourself making many mistakes that could leave you with buyer’s remorse later.
House Hunting Before Applying for a Mortgage
Let’s face it. We all become very anxious to find the house of our dreams. Thus, we quickly start to search house for sale in our desired neighborhood.
The common mistake of house hunting before applying for a mortgage is not meeting with a Mortgage Lender first. The reason why you meet a mortgage lender before searching for a house, is to see what you are pre-approved for. Your lender will help you understand what you can or cannot afford.
So, before you fall in love with your “dream house” be sure to get a fully underwritten pre-approval letter. Being pre-approved sends the message that you’re a serious buyer whose credit and finances pass muster to successfully get a loan.
Find a Quality and Honest Mortgage Lender
Most First Time Homebuyers just have their eyes on the prize. That is, the house they want! However, they don’t research the Mortgage Lender that they are talking to.
A good mortgage loan officer can look at your situation and diagnose any potential roadblocks ahead to give you a clear understanding of your home-buying options.
It’s easy to fall in love with homes that might stretch your budget, but overextending yourself can lead to regret and worse later. Finding a good mortgage loan officer, can help you understand the finances and see the monthly payments you can afford.
Just because you can qualify for a $300,000 loan, that doesn’t mean you can afford the monthly payments that come with it. Factor in your other obligations that don’t show on a credit report when determining how much house you can afford.
Don’t be Careless with Credit
Lenders pull credit reports at pre-approval to make sure things check out and again just before closing. They want to make sure nothing has changed in your finances. Any new loans or credit card accounts on your credit report can jeopardize the closing. First-Time Homebuyers often learn this lesson the hard way.
- Do not apply for new credit card or close any existing ones.
- Do not take out new loans
- Do not make a large purchase on existing credit accounts
- Pay down your existing balances to below 30% of your available credit limit and pay your bills on time and in full every month
The Down Payment Amount Myth
The long-held belief that you must put a down payment 20% is a myth. While a 20% down payment does help you avoid paying private mortgage insurance (PMI), many buyers today don’t want to put down much money. Per the National Association of Realtors, the average down payment on a home is 13%
However, keep in mind that as a First Time Home Buyer, you can put as little as 3% down payment for a conventional mortgage. But, keep in mind, you will pay for Private Mortgage Insurance. Some government-insured loans require 3.5 percent down or zero down, in some cases.
Miscalculating Hidden Costs
Bankrate.com found that the average homeowner pays $2,000 in maintenance services every year. Not having enough cushion in your monthly budget, can quickly put you in the red if you’re not prepared.
Your Mortgage Home Lender can help you crunch numbers on taxes, mortgage insurance and utility bills. Shop around for insurance coverage to compare quotes. Finally, aim to set aside at least 1% – 3% of the home’s purchase price every year for repairs and maintenance expenses.
Are you in the market for a Home Loan and would like to discuss your options with an experience lender? The Mortgage Specialist is waiting for you! Call today at (954) 770-0626 or email firstname.lastname@example.org.
Ready to get started but want to see if you pre-approve. No problem! Fill out our application online and The Mortgage Specialist will contact you to proceed.