Common First Time Home Buyer Mistakes
June 16, 2022 | Posted by: Sherry Corbitt
This is a frequently discussed topic, which is answered quite often. Yet with how high the housing market is right now, going over this topic is essential for first-time buyers. Having up-to-date information is vital to ensure that your first purchase runs smoothly.
Not Knowing What Mortgage You Want
Although you will not be one hundred percent certain about the mortgage you will get until you get approved, you should know what you overall want. This can include if you want a fixed or variable rate, the type of payment method, and how long you want to amortize. Of course, you should think these options over well before you decide. Yet having this decision before you apply for a mortgage will save you time, yet it will also make it much easier on the lender's side.
Not Saving A Large Enough Down Payment
This certainly is a common problem that many first-time buyers make. Some either save the wrong amount or don't give much thought to their down payment. Being inexperienced is understandable, yet you should be knowledgeable before you think of purchasing. Your lender will want to see your down payment at the beginning to get you approved for your mortgage. With too small of a down payment, you certainly will not get very far. Although the lender could lower the mortgage amount, depending on your situation and lender, it may not be possible. Start saving for your down payment a few years before applying for a mortgage. This way, you will have a substantial amount and can be approved for a mortgage without the hassle.
Looking at Houses Too Early
Getting house ideas by looking early is not a bad thing per-se. Yet this can shortly lead to browsing at various housing sites, which list beautiful houses. You can get attached to some of these houses and you may be set on buying a house you find. Yet later you may discover that you can't get a mortgage for it, since it is too expensive. This not only will be a let down, yet it also may lower your spirits to find another house. Only start looking at houses once you have established how much you have for a down payment and approximately how much you can get for a mortgage.
Not Calculating the Cost
This should be one of the most critical priorities, yet is honestly can be overlooked by many first-time buyers. Closing costs are one of the main costs involved in a mortgage. Some people think that these costs are minimal, yet the reality is that closing costs typically range anywhere from $1000 to $10,000, depending on your mortgage. This is a significant amount that cannot be overlooked. Some other costs include lender and broker costs. Depending on your mortgage, you may have lender and broker costs. These costs are typically 1% of your mortgage. Make sure you have an estimate calculation of how much these costs will be beforehand. Take the time to save for these costs well before applying for your mortgage.
Going Directly To a Bank
Another common mistake that many first-time buyers make is going to a bank to get a mortgage. Although this is possible, it is not a great choice. The bank has to stick with their standard rates, so they won't be able to get you better rates. There is also a much higher chance of being denied when applying for a mortgage. Getting a mortgage through a bank will not only take as long, yet it most likely will cost you more. Instead, use a mortgage broker when applying for a mortgage. They have connections with numerous banks and can not only get you a better rate, yet they can get you approved much quicker.
We all make mistakes, especially financial ones. Yet if you are a first-time homebuyer, learn from these mistakes and do your best to avoid making the same ones in your purchasing process.
-Lewis, Holden (2019). 12 First-Time Home Buyer Mistakes and How to Avoid Them. Nerd Wallet. Retreived from https://www.nerdwallet.com/article/mortgages/first-time-home-buyer-mistakes-that-are-easy-to-avoid