Purchasing your first home is going to be one of the biggest moments in your life, and that type of investment could positively impact your finances for many years to come. That being said, there are quite a few roadblocks that a first-time buyer might run into, and you will need to do some research if you want to avoid those problems.
Not Getting Pre-Approved
One of the most common mistakes that buyers make is not applying for loans until they have found a piece of property that they love. Unfortunately, not getting pre-approved for a loan could end up costing you quite a bit of time and money. While every lender is slightly different, most of those organizations will honor their pre-approved loan terms for at least 45 to 60 days.
That being said, it is important to understand that getting pre-approved doesn’t necessarily mean that the rates won’t change. To lock in the interest rates that you were offered, the lender will most likely ask for a sizable deposit. Once that deposit has been made, your rates and terms should be locked in for 60 to 90 days.
Only Working With One Lender
Even if the first lender that you went to offered you seemingly good rates and immediately approved your application, you still need to shop around. When a lender is determining the rates on a loan, they must take many different variables into consideration. If a different lender alters those rates by even a very small percentage, it could end up saving you thousands in the coming years.
Getting a few loan approval is a great first step, but you shouldn’t apply to dozens of lenders who are all going to perform hard checks on your credit. All of those checks could bring your credit score down by multiple points, and that is going to impact your interest rates.
Not Considering All of the Costs
Once you have been approved for a loan, it might be tempting to immediately head out and start making offers on homes. Unfortunately, there are some other financial factors that you must consider. In order to determine the real cost of house ownership, you need to take a very close look at all of the ongoing costs that you will have to take care of in the coming years.
In addition to your monthly mortgage payments, you should also account for expenses such as regular home maintenance, repairs, and future utility bills. If the home is in a HomeOwners Association, then you will most likely have to pay monthly or quarterly HomeOwners Association fees as well.
Spending the Entire Budget
As a first-time buyer, you are probably wondering how much of your budget you should spend. While making an offer on a huge piece of property might seem like a good idea at first, you probably don’t want to spend everything that you were approved for. You must also make sure that you have an emergency fund that never gets touched.
In most cases, a buyer should never make an offer on a home unless the total monthly payments aren’t going to exceed 28 percent of their gross monthly income. Going over that amount could push your finances to the limit and potentially result in expensive problems.
Not Scheduling a Comprehensive Inspection
Even though you are probably very excited about the notion of homeownership, you still need to remain patient when it comes time to narrow down your choices. After you have found one or two homes that you really like, you need to schedule a comprehensive inspection with a third-party. That inspector will help you catch issues that might become problematic later on.
If the inspector has shown you some problems, then you might want to back out of the sale. You can also speak with the current owner about lowering the asking price so that you can cover repairs and renovations.
While this process might seem intimidating at first, you should be able to avoid some of the most common obstacles that people run into as long as you remain patient and diligent. With a little bit of hard work, you are sure to find the property of your dreams at an amazing price.