Buying a home for the first time is a big decision. Because the process has so many layers, many first-time homebuyers end up making costly mistakes that prevent them from getting into their dream home. To ensure the process goes as smoothly as possible for you, check out these common pitfalls and how to avoid them.
Forgetting to Consider All the Costs
When setting up your budget, you shouldn’t just look at the monthly mortgage payment. Unfortunately, some first-time home buyers think that if the mortgage payment is the same as their rent payment that they can afford the house. However, this doesn’t always work. You also need to remember utility bills, homeowners association fees, and repairs. As a general rule of thumb, you should set aside about 1 to 3% of the home’s value every year so that you have money as needed for repairs.
Not Getting Pre-Qualified Right Away
Ideally, you should get prequalified for a mortgage before you start shopping. With prequalification, you know exactly how much money you can get through a lender. Then, once you find the right house, you complete the process and get formally qualified for a mortgage. However, some first-time homebuyers start looking before getting prequalified. Then, when they find the right house, they start the application process at that time, and by then, the home may sell before they have a chance to complete all the paperwork. With prequalification, you know your budget and you are more or less ready to buy as soon as you find the right home.
Only Looking at One Type of Mortgage
Don’t just look at a single type of mortgage. While the 30-year fixed rate mortgage tends to be the most popular, it may not be right for you. Instead, make sure that you talk with lenders about other options such as an adjustable rate mortgage or a 15-year term. Similarly, first-time homebuyers should also look at special programs that can help them to get a mortgage with a lower down payment or reduced credit history standards, such as FHA or VA loan.
Failing to Research Down Payment Assistance Programs for First-Time Homebuyers
First-time homebuyers should also remember to look into down payment assistance programs. Typically, you need about a 20% down paymentto buy a home, but with an FHA loan or a VA loan, you can get by with a 0 to 3% down payment. However, by making the largest down paymentpossible, you reduce the total amount you owe, you put equity in your home right away, and you help to avoid mortgage insurance premiums. Talk with your lender to see if you can get any help making a down payment.
Spending All Their Savings
Even if you want to make a large down payment, you may want to avoid completely emptying your savings account. Homeownership comes with a lot of unplanned expenses. For instance, if someone breaks a window, you need some money so that you can fix the window. If you don’t have anything in savings, you may end up with a boarded-up window or with rain and snow coming into your beautiful new home.
At Bright Path Brilliant Mortgage Solutions, we help first-time homebuyers and others get the mortgages they need to move into their dream homes. To learn more or to get prequalified, contact us today.