Buying your first house gives a mixed feeling of achievement and security. You not only take a step closer towards fulfilling the big American dream but also secure your future. Buying a house is an overwhelming experience that comes with certain challenges and as a first-timer you need to be aware of the hurdles present in the path.
We say that every mistake is learning, but when it is about buying your first house, one needs to be aware of the possible mistakes to ease the entire process. We provide you with five common mistakes you need to avoid if you are buying your first house. Let’s begin.
1. Ignoring that Buying a House is More than Monthly Mortgage Payments
Managing your monthly mortgage payments from your monthly income doesn’t imply that you are eligible to buy a property. Many individuals, specifically the first time buyers don’t realize that purchasing a property involves much more responsibilities than a mortgage payment. It is a long-term commitment because home ownership comes with maintenance, electricity, taxes, property insurance and water bills. If you have plans to relocate to another place or switch jobs in the coming years, think before buying a house.
2. Finalizing a Home Before Getting the Loan Approval
It is possible for an individual to make the full payment of his first house in cash in the rarest of cases. First time home buyers need to find out whether they are eligible for a mortgage before finalizing on the house of their dreams. Getting prequalified for a loan provides an idea to the borrowers about where they stand and the amount of loan they can borrow depending on their income, employment, and other essential financial information. Many first timers are, however, afraid to get prequalified as they fear that the lender might tell them that they don’t qualify for the loan, or they may get a loan amount lesser than what’s required. Never make the mistake of skipping the prequalification process as it is always better to know where you stand so that you search for the house within the budget.
3. Spending the Entire Saving towards Downpayment
A mistake that many homebuyers make is using all the savings for down payment. Homebuyers who make a down payment of 20% or more are not required to pay for mortgage insurance. The advantage of paying no mortgage insurance, however, doesn’t imply that you will use all your savings to make the 20% or more down payment to avoid mortgage insurance. There is no point of living on the edge, and it is always better to have a rainy-day fund for more security. Paying mortgage insurance is always better than ending up with no savings at all.
4. Applying for a New Loan After Qualifying for Another
Don’t apply for a new loan to finance another big purchase immediately after you have pre-qualified for a mortgage. It usually takes 30 days to close the loan approval process and the lender pulls the credit report of the applicant before closure to ensure that his financial situation hasn’t changed after the approval. A new loan reflecting on the credit report might make you ineligible for the home mortgage.
5. Saying No to Professional Assistance
First time home buyers need to seek an assistance of a real estate agent and a loan officer to make the entire process easier. Instead of going to a listing agent, it is important that you go to a buyer’s’ agent for the help. Ensure that you hire an agent referred by your family, friends or acquaintances. Similarly, rely on a mortgage firm recommended by others for a less stressful approval process.
Your first house might be the biggest investment that you have made till date and it is, therefore, important to take a well-informed decision and avoid making the common mistakes mentioned above to make the entire experience better.