It’s easy for first-time home buyers to get swept up in the whirlwind of home shopping and make mistakes. Here are five common mistakes first-time buyers make and some advice for steering clear of these missteps.
Looking for a home before applying for a mortgage
Many first-time buyers make the mistake of viewing homes before ever meeting with a mortgage lender. This puts you behind the ball if a home hits the market you love, or you look at homes that you can’t afford.
“Before you fall in love with that gorgeous dream house you’ve been eyeing, be sure to get a fully underwritten preapproval,” said Alfredo Arteaga, a loan officer in California. Talking to only one lender
The more you shop around, the better basis for comparison you will have to ensure you are getting a good deal on a mortgage. Shop around with at least three different lenders, as well as a mortgage broker. Compare rates, lender fees and loan terms. Don’t discount customer service and lender responsiveness; both play key roles in making the mortgage approval process run smoothly.
Buying more house than you can afford
Overextending yourself can lead to regret and worse later. It can put you at higher risk of losing your home if you fall on tough financial times. Focus on what monthly payment you can afford rather than fixating on the maximum loan amount you qualify for. Factor in your other obligations that don’t show on a credit report when determining how much house you can afford.
Moving too fast to make a decision
Rushing the process can cost you later on. Map out your homebuying timeline at least a year in advance. Keep in mind it can take months — even years — to repair poor credit and save enough for a sizable down payment. Work on boosting your credit score, paying down debt and saving more money to put you in a stronger position to get preapproved.
Draining all of your savings
Home buyers who put 20% or more down don’t have to pay for mortgage insurance when getting a conventional mortgage. But it’s not worth the risk of living on the edge, said Ed Conarchy, a mortgage planner in Illinois. Paying mortgage insurance isn’t ideal, but depleting your emergency or retirement savings to make a large down payment is riskier.