Even though there’s nothing more exciting and fulfilling than being a first-time homebuyer, the process can sometimes seem overwhelming. Seasoned home buyers are at an advantage because they’ve been through the process. They know what to expect, and for the most part, they know what “not” to do. As a first-time homebuyer, you haven’t learned the ropes yet, so you may make a few missteps. The good news is that many common mistakes are avoidable!
Here’s a look at mistakes some homebuyers struggle with, as well as tips on how to avoid them.
One of the first things loan experts will do when you apply for a mortgage is to check your credit – so it’s important that you check your credit, too.
Your personal file not only determines whether you’re approved for a home loan, it could also impact your mortgage rate. You may have items on your report that delay a mortgage approval.
If you’re thinking about buying a home in the near future, now’s the time to check your credit – and if need be, build up your score.
Get a free copy of your credit reports from www.AnnualCreditReport.com or order your reports directly from the credit bureaus (Experian, TransUnion, Equifax).
A conventional loan is a popular product, but it’s not the only one available to you. If you don’t have much money to put towards a down payment, a USDA or FHA loan may be a good fit.
Because USDA home loans promote rural development, many people assume these loans can only be used to purchase farm land. However, some properties in suburban areas are also eligible for this financing.
There’s also the misconception that FHA home loans target low-income borrowers. While it’s true that these loans are more accessible to those with lower incomes and credit scores, there’s no minimum or maximum income requirement for an FHA home loan. The program is available to borrowers of all income levels.
You don’t have to pay private mortgage insurance (PMI) with a 20% down payment, which might be tempting to dump all your savings into a home purchase to avoid this expense.
Avoiding PMI does reduce your mortgage payment, but emptying your savings is never a good idea in case of emergencies.
What if you get hit with a major unexpected expense after buying the home? Or worse, what if you lose your job after closing? Life happens, so it’s wise to maintain cash reserves for emergencies—at least two to three months of income.
Shopping for a House Before a Mortgage
Don’t make the mistake of shopping for a home before getting pre-approved.
Having a pre-approval letter isn’t required, but it does carry a lot of weight. It shows how much your bank is willing to lend you, and it also indicates that you’re a serious buyer.
If you submit a home offer without a pre-approval, the seller may reject your offer because you don’t have financing to back it up.
Our loan experts can help make your homeownership dreams a reality. We have programs that are perfect for first-time homebuyers, and we’re happy to help you find the right loan for your situation. Give our experienced loan experts a call to start your application.