Buying a home for the first time can be exciting and just as challenging. After all, the home buying process can be confusing and complicated, even for experienced homeowners. When buying a home, it's best to be armed with information. Being knowledgeable about the process can help you avoid making a purchase that could hurt your long-term financial goals.
Here's a miniguide that will help you tackle the home buying process and ensure you end up with a home worth your investment.
First-Time Home Buyer Mistakes to Avoid
First-time homebuyers are prone to mistakes. It's important to learn from others to ensure that your home buying experience is a positive one.
Here are some common mistakes you'll want to avoid.
1. House hunting without a preapproval
A preapproval letter shows sellers that you mean business since it indicates you have the funds to purchase with the backing of a lender, and you’ll enjoy a shorter closing period. More importantly, a preapproval helps you determine what you can afford before you start house hunting. This can save you a lot of heartache and prevent you from falling in love with a home only to find that its outside your budget.
2. Not knowing your loan options
Don't make the mistake of only exploring one loan option. You could potentially be leaving thousands of dollars on the table. Compare the rates, fees, and loan terms from multiple loan products before choosing. And don't discount customer service as it plays a key role in the approval process.
When you are in the market for a mortgage, remember, there are multiple loan options available! Loans have different rates, terms, and benefits available. It’s important that you do your research to determine what you qualify for, and which option is right for you.
3. Moving too fast or acting on emotion
Buying a home can be a very emotional process. But it’s a financial investment that necessitates rational decision-making. Even in a buyer saturated market, it’s important to slow down and make logical decisions.
Buying a home is a major commitment much like a marriage. Make sure you go into it with the same level of care and consideration so that you are prepared for the relationship, before you say, “I Do.”
4. Depleting your savings
Buying more house than you can comfortably afford is a mistake that will stretch your finances, causing you significant stress in the long run. Always factor in your financial profile when planning or making any decisions.
Having cash available in a savings account that you can tap into even after your home purchase will give you peace of mind and set you up for better success and less stress when buying a home.
5. Being careless with your credit
Any new loans or credit card accounts, acquired just prior to or during the home buying process could mess with your credit and jeopardize the final loan approval.
Focus on These 3 Tips for a Better First Time Home Buying Experience
Now that you know the common first-time homebuyer mistakes, and how to avoid them, here are three tips that will help guide you in the right direction and lead to a better first-time home buying experience.
1. Start your research as early as possible
Your home could be the biggest purchase you’ll ever make. It’s important to get it right. Not doing your research is the biggest pitfall you can find yourself in. The consequences of an impulsive decision can last for what feels like a lifetime.
First, research the local area and consider the types of property you can afford. Also, always take time to research any properties you’re interested in to avoid nasty hidden surprises.
2. Get preapproved BEFORE you get started
It's tempting to jump right into house hunting before even getting preapproved. With a preapproval letter in hand, you'll have stronger negotiating power, and you're less likely to run into last-minute surprises with your lender.
3. Determine how much home you can afford
Figure out the budgetary allocation you can safely commit to on a home before you shop for the house. First, you'll need to save for a down payment and closing costs. It's always a good idea to save at least 20% for a down payment, as this may help you avoid private mortgage insurance (PMI).
Once you have a down payment and a preapproval letter, you can easily determine how much you can afford. It’s advisable to spend no more than 28% of your gross monthly income on home expenses including your monthly principal and interest payment, payments for property taxes, hazard insurance, mandatory association dues, and PMI if applicable.
Get it Right the First Time
If you take our advice and learn from these tips, your home buying experience might go just a little smoother than expected and not be so intimidating. Now that we’ve discussed what to do while going through the home buying process, we want to remind you of a few important factors to keep in mind prior to the process beginning.
- Your financial health
- Savings and spending habits
- Current credit status
- Type of home that best suits your needs
The home buying process can be daunting, especially if it’s your first time at the rodeo. Partnering with an experienced professional can help settle some anxieties by giving you the information you need to tackle the task at hand.
If you’re looking for a mortgage lender, know you’re not alone and give us a call! Community First is always available to sit down with you and guide you through the home buying process.