The Common Pitfalls of New Homeowners
Each year, a new crop of first-time buyers enters the market and inevitably repeats the blunders made by their parents, siblings, and friends when they purchased their first homes.
Today’s inexperienced purchasers, though, may break the trend. Here are some common blunders made by not only Washington first time home buyers, but other buyers as well.
Failing to calculate a realistic mortgage payment
There’s no use in looking for a home if you can’t afford it. It’s possible that you’ll waste time seeing homes that are too expensive for you right now, or that are priced too cheap.
The dream of many first-time purchasers is to get a mortgage loan with a manageable monthly payment. Low expectations might be beneficial at times.
Obtaining a single price estimate
Comparing mortgage rates is just as important as when buying a vehicle or any other major purchase. Interest rates, along with other expenses like points and closing charges, may vary significantly amongst mortgage lenders.
Nearly half of all borrowers, though, don’t even look around before committing to one loan, said the Consumer Financial Protection Bureau.
Not Checking Credit Reports and Fixing Errors
Lenders will look at your credit history closely to determine whether they should lend to you and at what interest rate. A higher interest rate may be offered to you if your credit report included inaccuracies. This is why it’s important to check your credit report for inaccuracies.
Putting down an inadequate amount of money
A twenty percent (or more) down payment is not required to purchase a property. Depending on the financing program, it may be possible to put as little as 3.5% down on a house (see point 5). Of course, there are instances when homeowners will wish they hadn’t done that.
Not interested in programs for first-time home buyers
If you’re buying a house for the first time, you probably don’t have a sizable emergency fund set up to cover the down payment and closing expenses. Don’t make the mistake of thinking that you have to put off buying a house until you’ve amassed a hefty down payment, however. First-time homebuyers may find a number of low-down-payment loan programs, including those offered by their respective states. These programs often provide down payment help and preferential mortgage rates.
To be sure, one in eight millennial homeowners says they wish they had put down more money. However, the great majority of people do not share this remorse.
Having little regard for government-backed credit schemes
Many first-time buyers are only able to or choose to, put a minimal amount down on a house. However, they aren’t constantly aware of the existence of government programs that make it simple to acquire a property with no or little down payment.
Uncertainty on whether to use reward points
Discount points on a mortgage are up-front costs that might lower your monthly payments. If you’re in a position to do so, purchasing discount points may help you save a significant amount of money on your mortgage interest over the course of the loan’s term.
Using all of your savings
A new homeowner can anticipate unforeseen maintenance costs when purchasing a previously owned house. After natural disasters, it’s possible that you’ll have to pay for repairs or replacements, such as a water heater or insurance deductible.
To make a credit application before a transaction is final
Suppose you decide to apply for a mortgage one day. After the financing closes (or is finalized) a few weeks later, you’ll be given the keys to the home. The time frame between is crucial: You should avoid making any major changes to your credit score. Doing large purchases on credit like getting a new credit card, buying furniture or appliances, or getting a vehicle loan before the mortgage closes is a bad idea.
No mortgage application until after home hunting
House searching is more fun than financing alternatives with a banker. Many first-time homebuyers do the following: Before borrowing money, they look at residences. When they find the right property but can’t afford to bid, they’re disappointed.