Buying a home is already complicated enough, (for both first-time buyers and previous buyers) and I've found that when there is a lack of research or knowledge involved, it can lead to expensive problems down the road. Generally home buyers take well-intended advice from family and friends that leads to costly mistakes when they don't have professional help. The first step in the process is finding a REALTOR®. Did you know that you don't even have to pay an agent when they help you buy a home?! In fact, they get paid by the seller. After you have a REALTOR® they can prevent the costly errors below:
Not Knowing What You Can Afford
The biggest problem I find is that people begin looking at homes before they know how much they can afford. There is no going back from falling in love with a home that's out of your budget before you even know what your budget IS. Once buyers determine their budget, the homes that are affordable cannot compete with the lofty one they fell in love with. Getting pre-approved for a mortgage can help you shop with confidence. Additionally, you need a pre-approval to put an offer on a house, so why not get one from the get-go!
Not Comparing Rates
Interest rates can vary widely among lenders. Typically, I see buyers only submit an application to their bank as the bank already has access to their financial information. That's definitely a quick and easy way to start shopping! However, did you know you can change financing once you're under contract on a home? That means, you still have a chance to shop around and find a loan with the most favorable terms. You're talking the potential to save tens of thousands of dollars over the life or your mortgage!
Choosing the Wrong Down Payment
I've found many buyers who feel they can never buy a home because of the need for a 20% down payment. Everyone, please know you can buy homes with a down payment that is MUCH LESS than the 20% that's frequently mentioned. There are also many offers for buyers to aid in their purchase from down payment assistance programs, Department of Veterans Affairs, Department of Agriculture, and the Federal Housing Administration. Word to the wise though, a lower down payment could mean higher interest rates. Therefore, refer to the importance of the paragraph above.
Making Large Purchases Before Closing
I've seen buyers go under contract on a home and they immediately start buying furniture and appliances. DO NOT DO THIS IF YOU WANT TO CLOSE ON A HOUSE. The lender will check your credit score and bank accounts before closing. Any substantial changes will impact your debt-to-income ratio, which is the basic formula used to determine your qualifications for your loan. The lender could raise your interest rate or fees or cancel the mortgage entirely. Wait until after closing to spend the big bucks!
Not Considering Other Costs
Many people get so caught up with what it costs to buy a home that they forget to think about the long term costs of ownership. These can include: Property taxes, homeowners insurance, maintenance, repairs, and utilities. This is why meeting with a lender is key so you know exactly what your monthly payment will be.
Do Your Homework
Buying a home can be just as confusing as it is exciting. That's why we're here to share our experience and ensure that your best interests are always at the forefront.
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