Ready to buy your first home? Great! You’re about to join millions of proud homeowners in the United States. Shopping for your home is an adventure in and of itself: all of the appointments, the time spent commuting, and planning all of the improvements you’ll make will make for a busy couple of months. You should be aware, though, that some people get caught up in the search, and make mistakes for which they must pay later. Avoiding some first-time home buyer mistakes is relatively easy – especially when you work with an experienced local real estate agent. Part of the job of a local real estate agent is to offer individualized guidance, and work within your budget. This includes cautioning you before you spend too much money on your home, or make a bad investment. Whether or not you go through your local real estate agent, take care of yourself and your financial future by being cautious, but decisive.
Of all of the mistakes that you could make while searching for you first home, the first one could be years before you even begin looking. Mismanaging credit is one of the worst things that you could do for your financial future, no matter if you’re buying a home, a car, or renting a property. Your credit rating will affect the minimum down payment, your mortgage terms, interest, and ability to move into the home that you want. Before you dream of a new home, work on your credit. Set yourself up for good habits by paying your bills on-time, and conserving your spending. Teaching yourself to stay on a budget will be immensely helpful as you’re working your way to great credit. If you need help, whether it’s because of a stain on your credit, or simply not knowing where to start, contact a credit counselor. No matter where you are, there will be a service that is available to you to help you get back on track. If you’re having trouble finding someone, reach out to your local government for assistance in your search.
Overspending on a New Home
Speaking of good budgeting, avoid spending too much money on your new home. This is one of the more common mistakes than you may realize – with the excitement of falling in love with a house, you may feel that getting all of the home that you can afford will make you happier. Comfortably affording your new home, however, doesn’t mean that you’ve spent every last cent that you can afford on your new home any more than it means that you’ve gone over your budget for a new home. The importance of staying at or under budget cannot be overstated: you’ll save yourself the stress of meeting a high-cost mortgage, worrying about other needs that the house may have, and minimizing the amount you’ll be able to save for retirement.
The home with all of the details that you want will undoubtedly tempt you, but if you give into that temptation, you may quickly find yourself in over your head. If you don’t make your mortgage payments on-time, every time, you run the risk of putting your home into foreclosure. During foreclosure, your lender legally seizes possession of your home to compensate for missing mortgage payments, and applicable fees. While this isn’t the end of the line for you, foreclosure leaves a terrible, sometimes irreparable stain on your credit. Even if you’re able to resolve your credit issues, this will be a long, tedious experience that can easily be avoided. Making sure that you only buy as much home as you can comfortably afford is the best way to prevent ruining your credit.
Draining Your Savings
Having good credit is a priority when you’re shopping for a new home, but just as you don’t want to overspend on your new home, you also don’t want to completely liquidate your savings. Ensuring that you have enough savings for the initial down payment for your new home, usually around 20% of the cost of the home, is essential, but that’s not all for which you will need to be prepared. The problem isn’t just that you’ll need your down payment, but you’ll also need to be prepared for changes that you may need to make to your new home. Home improvements are something that your typical potential homeowners fail to consider, and this can have some difficult consequences. Imagine finding a great home that’s a great fit, and discovering that the bathroom pipes need to be replaced. That job can easily run you several thousand dollars, and will need to be handled immediately to prevent mold or other water damage.
Home improvements aren’t the only consideration for new home: remember that the process of buying your home costs money, too. Taxes, fees, commissions, service charges, insurance, and other services that you may need will impact your finances during the process.
Ignoring Federal Loan Programs
There are a number of resources available to first-time home buyers. There are even programs to help you locate resources that can help you comfortably purchase a new home. For example, did you know that buying a home in a rural area may qualify you for a special type of loan? Did you know that the same is true if you’ve served in the armed forces? Even if you don’t meet these requirements, you may still be eligible for an FHA loan. Even if you’re able to find a lender that doesn’t need to offer these types of loans to their clientele, it is always best to consider them with all of your options. These loan programs, remember, are designed to assist consumers who are able to afford to buy a home, but are having difficulty getting financing.
Only Reaching Out to One Lender
Assuming that interest from one lender guarantees a great loan is one of the more common mistakes made by first-time home buyers. While shopping for your new home, you should contact as many lenders as you can. Different lenders will inevitably have different options for you, and some may offer you some special incentives if you borrow from them. You’ll only know this if you do your due diligence, and shop around for a mortgage with the same scrutiny with which you shop for you home. Wherever you buy your home, it is imperative that you take your time, work with a professional, and keep your feet on the ground.