6 Common Mistakes First-time Homebuyers MakeReturn to Blog
Buying a home is one of the most significant financial decisions you’ll make in your life. Although, on occasion, it can be one of the largest sources of stress for many first-time buyers is the financing process. Unless you’ve planned thoroughly and dedicated time for research, receiving a mortgage can feel complicated and overwhelming. Luckily, you could learn from these common mistakes first-time homebuyers make to have a less stressful experience:
1. Not realizing the full cost of homeownership:
Being a first-time homebuyer involves much more than the monthly cost of renting, which usually includes your rent payment, some of the utilities, your internet, and cable bills. As a homeowner, you’ll be responsible for the additional monthly costs that may have been covered by your landlord. That includes the following expenses: Water, sewer and garbage, monthly HOA fees, landscaping, property taxes, and homeowners insurance. All of that is in addition to maintenance costs, which you should set aside 1-3 percent of the purchase price of the home annually to cover repairs and maintenance.
2. Assuming you won’t qualify:
Many renters think they can’t afford to buy a house because they haven’t saved enough to pay a 20% down payment. While 20% is ideal, you don’t necessarily need that large of a down payment to buy a home. Even some conventional loans allow for down payments as low as 3%. Some mortgages, such as VA loans for veterans and military or USDA loans for buyers in rural areas, don’t require a down payment at all.
3. Getting pre-qualified at the last minute:
Many first-time buyers wait until they’ve found a home they want to buy before talking to a lender, but there are many benefits to getting pre-qualified early. Pre-qualification can help you shop in your price range, act fast when you find a house you want to make an offer on, catch and correct any errors on your credit report before they cause a problem with your loan.
4. Only consulting with one lender:
Many home shoppers use a lender who was recommended by a friend, family member, or real estate agent, and they don’t bother shopping around. The Consumer Financial Protection Bureau (CFPB) recommends talking to at least three lenders to get the best loan for you. So it’s a good idea to do your research with lenders early at the pre-approval stage. Although it’s not required, most home shoppers end up getting a loan through the lender who pre-approved them. So it’s a good idea to do your research with lenders early at the pre-approval stage.
5. Spending your entire budget:
When a lender provides a pre-approval or pre-qualification letter, they’ll typically include the maximum amount they will lend you. There are rules lenders follow to determine what you can borrow, such as the 28/36 rule, which says that a homeowner should spend no more than 28% of their gross monthly income on housing expenses, and no more than 36% on overall debt.
6. Not researching down payment assistance programs:
Saving for a down payment is often indicated as the biggest hurdle to homeownership for first-time buyers. These programs typically offer a second or third mortgage or grant, which allows for 0% interest rates and deferred payments. You can also search for down payment assistance programs on sites like the Down Payment Resource Center.
To learn more ways to avoid first-time homeowner mistakes, please contact Darryl Glass via phone (510) 500-7531, or e-mail firstname.lastname@example.org. If more convenient, you may also schedule a call with Darryl on his calendar below: