While exciting, the monumental decisions to be made when purchasing a home for the first time can be frightening. Many mistakes await the incautious first-time buyer. It is all too easy to get carried away in the exhilaration of home shopping and neglect practical matters. The following four mistakes are commonly made by first-time home buyers. Awareness of them will help you to avoid them as you proceed toward owning your first home.
Failing to Determine Your Limits
You can waste time if you do not establish the amount of house your budget will allow from the beginning. Try a calculator that determines mortgage affordability, so you ascertain an affordable price range. You do not want to overextend yourself by falling in love with a house that stretches your budget. As home prices trend upward, sticking close to your budget is vital. Focus on the monthly payment that you can manage instead of fixating on whatever maximum amount for which you are qualified. As a first time home buyer, you do not want to saddle yourself with a bill that is beyond your reasonable limits.
Settling with One Rate Quote
You would not shop for an investment like a car or other high-ticket items without comparing offers. In this line of reasoning, it only makes sense to compare mortgage offers. A home is a huge investment. Treat it as you would other large purchases, keeping in mind fees like closing costs as well as discount points. Nearly half of borrowers do not bother to shop for a loan. Do not make this rookie mistake. Apply with a variety of mortgage lenders, noting that all mortgage applications filled out within a window of 45 days count as a single credit inquiry.
Saving Too Little for Down Payments
Traditionally, down payments were 20% of the total. In the current market, many first-time homebuyers cannot manage that amount. In fact, the average amount has dropped to 12% of the price. For first-time buyers, the amount is even lower: realtors report that first-time homebuyers tend to put just 5% down. However, this is among the worst mistakes possible. You want a minimum of 10% down.
Failing to Properly Calculate Homeownership’s Hidden Costs
Owning a home has an abundance of hidden costs. As a first-time buyer, it is easy to overlook many of these costs and fail to budget for them. Remember expenses like mortgage insurance, property taxes, hazard insurance, maintenance, repairs, utilities, homeowners’ insurance, and more.
Rookie homebuyers can easily make the mistake of rushing into things without knowledge of expenses and complications. Awareness of these mistakes will help you to avoid them. Save up, save overall, and save yourself the worry of bills you cannot pay by being well prepared when you make your purchase.