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Many milestones in our adult lives leave us thinking, “why didn’t anyone tell me how to do this?” Buying your first home can be one of those moments.
The good thing is that there are many guides online and expert advice if you do your research. You can learn what to look out for, tips that can help you, and how to avoid first-time homebuyer mistakes.
Ultimately, you have to do what is best for your situation. But let’s discuss some ways to make your homebuyer journey as smooth as possible.
1. Get Preapproved First
The biggest mistake that first-time homebuyers make is shopping for a home before they’ve been preapproved.
Getting preapproved for a loan helps you find out how much home you can actually afford. You may have a rough idea of what you can afford but a mortgage isn’t something that you should estimate.
By not getting preapproved, you could end up falling in love with a home that you ultimately won’t be able to afford. This is frustrating for everyone involved.
Being able to show a preapproval letter will also help your chances of actually getting said home when you make an offer. In a seller’s market, they’re likely to not even consider buyers who have not been preapproved. They want the deal closed and will simply move on to the next buyer who has preapproval.
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2. Buy When You’re Ready
This can mean many different things but buying a home before you’re ready, whether financially or mentally, is a big mistake.
Owning a home is a big commitment — you’re putting down roots in one place for at least the near future. You’re committing to a mortgage payment and other expenses monthly for the duration of the loan. Not taking that seriously could land you and your finances in major trouble.
Many first-time homebuyers come from rentals or right from their parent’s house. In these situations, you might not see all of the time and resources it takes for maintenance and upkeep, not to mention payment for things like insurance and property taxes.
Once you commit to being a homeowner, you also need to commit to caring for the home. You’ll be your own maintenance person and you’ll need to pay if you hire out for repairs.
Ready your finances to be mortgage-ready. Establish savings that you contribute to every month and don’t touch it otherwise. This will give you a start on your down payment, closing costs, and other fees.
It’s an even better idea to save more than what you’ll use. You don’t want to spend your first few months in a house with no savings for emergencies.
Having established savings will not only improve your chances of loan approval, but paying more down upfront could also lower your monthly payment and get you a better interest rate too.
Pay down your debts and improve your credit. This could mean establishing credit, disputing credit report errors, or paying down existing credit cards and loan balances. Once you apply for a mortgage, you shouldn’t apply for a credit card or make any major changes to your credit until the keys are in your hand. Do everything that you need to do with your credit before you even apply.
3. Shop Around for Lenders
First-time homebuyers will often go with the first lender they talk to and that’s a mistake.
Different lenders will have different loan products, fees, terms, and rates. Comparing information from at least three lenders could get you a better deal and save you, potentially, thousands of dollars.
Not only dollars, but also time. If a lender isn’t responsive enough for you from the get-go then that’s a perfectly legitimate reason to go with someone else. As a first-time homebuyer, you will want someone responsive and attentive to your needs.
4. Be Flexible
Determine your list of priorities in your home — needs versus wants. This will help you to stay on budget and not spend too much on the “perfect house” your first time out.
You’ll want to build equity on a home and not spend everything you possibly can, just to get everything you want. Ideally, your mortgage payment shouldn’t be more than 30% of your gross monthly income.
Look at affordable neighborhoods, even if they’re not the exact location you want. Go without the stainless steel appliances or quartz countertops. Look, instead for the right amount of bedrooms or if it’s accessible to everyone who will be living there.
5. Find Programs for First-Time Homebuyers
Conventional loans may be common but don’t discount FHA loans or VA loans. Ask your lender about options and state programs for first-time homebuyers. You could get down payment assistance or pay no down payment at all.
These loans are flexible for buyers who have a low credit score or have had trouble getting approved before. They can also help you save on closing costs and other fees. Specifically, If you’ve had a bankruptcy or any financial trouble in the past, an FHA loan is worth looking into.
This advice is just a start in avoiding first-time homebuyer mistakes. Having a loan officer to support you and guide you through the process can make all the difference. They’re there to answer all of your questions and ease your worries.
Let the professionals at Homefinity guide you through the homebuying process, with as little or as much assistance as you’d like.
Reach out to us today to get started.