Buying a Home for the First Time? Avoid These Mistakes
Buying a home, especially if youâre a first-time home buyer, can be daunting and nerve racking.
But it does not have to be. LendingTree’s online loan marketplace has got you covered – at least when it comes to getting a mortgage.
A 2016 study by the Office of Research of the Bureau of Consumer Financial Protection reveals that prospective buyers who shop for a mortgage when buying a home for the first time report âincreases consumersâ knowledge of the mortgage market and increases consumersâ self confidence in their ability to deal with mortgage related issues.â
The importance of shopping for a mortgage as a first-time home buyer is that it saves you money in the long term and âreduces the cost of consumersâ mortgages,â the study found.
The home-buying process can be intimidating. So being aware of these mistakes when buying a home for the first time can help you save thousands and thousands of dollars in the long term.
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10 Mistakes to avoid when buying a home for the first time.
1. Not knowing your credit score.
We are all aware that the higher your credit score, the better.
Yet, despite this fact, many people fail to check their credit score before
buying their first home.
And a low credit score can lead to a high interest mortgage loan, or even worse, a loan rejection. Given the fact that your credit score is the number 1 item mortgage lender looks at, it pays off to know where you stand.
Credit Sesame will let you know what your credit score is for free and monitor it for you. It will also offer tips on how to raise your credit score and reduce your debt.
Just sign up for a free account â it only takes 90 seconds.
2. Not shopping and comparing mortgage rates.
Mortgage rates and fees vary across lenders. In other words, two applicants with the identical credentials can get different mortgage rates. Despite this, however, many fist-time homebuyers fail to shop and compare mortgage rates before buying their first home.
The study reveals that 30 percent first time homebuyers do not
compare and shop for their mortgages, and more than 75 percent reported
applying for a mortgage with only one mortgage lender.
The study further reveals that âfailing to comparison shop for a
mortgage costs the average homebuyer approximately $300 per year and many thousands
of dollars over the life of the loan.â
An easy way to shop and compare for a mortgage is with LendingTree. Their simple and straightforward platform can help you find and apply for the right loan all in one place.
3. Sticking with the first mortgage lender you meet.
While itâs tempting to work with your local mortgage lender whoâs
only a few blocks away from your home, this decision requires more time. Take
time to meet with at least three mortgage lenders before picking the best match
Fortunately, LendingTree free online platform, allows you to quickly browse several mortgage rates with several mortgage lenders without visiting a dozen bank branches.
4. Not knowing what loans are available to you.
If you’re buying a home for the first time, one thing you need to address is what types of loans are available to me. Sometimes the answer to this can be quite simple: conventional loan. This is because most people know about this type of loan.
But conventional loan requires at least 20% down payment. And the credit score needs to be in the 700. *Note: You can put less than 20% down payment, but you will have to pay for a private insurance mortgage (PMI).
Sometimes it’s not feasible to come up with that type of money as a first time home buyer. So knowing if other loans are available to you is very important.
One type of loan that is popular among first time home buyers is FHA loan. It is so popular because it’s easier to get qualified for it. And the down payment is very little comparing to that of a conventional loan.
For example, FHA loans require a 580 credit score and a down payment as low as 3.5% of the home purchase price. This makes it easier to qualify for a home loan when you’re on a low income.
VA loans are another great option for first-time homebuyers. However, you have to be a veteran. Unlike a FHA or a conventional loan, VA loans require no down payment and no mortgage insurance. This can save you thousands of dollars per year.
So if you’re in market for a loan to buy your first home, you need to educate yourself about the different available loans.
Not All Mortgage Lenders Are Created Equally
When it comes to getting a mortgage, rates and fees vary. LendingTree allows you to view and compare multiple mortgage rates from multiple mortgage lenders all in one place and at the same time, so you can choose the best rates for your needs. LendingTree makes getting a loan faster, simpler, and better. Get started today >>>
5. Not getting pre-approved for a mortgage
One of the first time home buying mistakes you should avoid making is not getting a pre-approval letter. You can simply contact a lender and request it. The mortgage lender will pull your credit report to make sure you have the minimum credit score requirement.
They will also need your bank statements, W2s, recent income tax returns, pay-stubs to verify your employment and ability to afford the loan.
Why this is important? A pre-approval letter means that you’re a serious buyer. It signals that you’re able to commit to the house once an offer has been accepted. It also makes you more desirable than the other potential buyers.
Get a Pre-Approval for a Mortgage Today
6. Not knowing how much you can afford
Buying a home is probably going to be the biggest expenses you’ve ever made. But buying a house you cannot afford can lead to financial trouble along the road. Paying an expensive mortgage for 15 to 30 years on a low income can be hard.
So it pays to know how much house you can afford before you start searching for your home.
The best way to know how much house you can afford is to look at your budget. Take into account your expenses and income and other costs associated with owning a home.
7. Not knowing other upfront costs
If you think that the only cost to buying a home is a down payment, then think again. There are several upfront costs associated with owning a house. These upfront costs include private mortgage insurance, inspection costs, loan application fees, repair costs, moving costs, appraisal costs, earnest money, home association dues.
As a first time home buyer, this may come to you as a surprise. So, be ready to have enough money to cover these costs.
8. Failure to inspect your home.
Although some banks would prefer you inspect your home before they offer you a loan, it’s not mandatory. But that does not mean you shouldn’t do it. Not inspecting your home can cost you a lot. Inspection discovers defects that you may not know about. Inspection costs can be anywhere from $300 to $700.
Don’t be stingy with these costs. It’s better to find out about any hidden defects , like a faulty wiring and plumbing, than finding about them later. To avoid regretting your decision or having to spend thousand of dollars on repairs down the road, consider an inspector.
9. Failure to check out the neighborhood.
Just because the street or the neighborhood your potential house is located is quiet or is not run down doesn’t mean crime is not a problem. So before buying your home, you should check out the neighborhood. Take a trip at night to get a feeling of the environment. Talk to residents. Most importantly, check with the local police station – they can be a great resource when it comes to crime rates in a particular location. This is simply one of the first time home buying tips you shouldn’t ignore.
10. Searching for a mortgage on your own.
There are several mortgage lenders available to you. But choosing one that is right for you can be tough.
The LendingTree online platform makes it easy and simple for you to find the right home loan for you. Now you can get matched up to several mortgage lenders all in one place and at the same time. And the whole process just takes a few minutes.
Follow these steps to get matched with the right mortgage:
- Go to www.lendingtree.com;
- Answer a few questions regarding the type pf loan yo need and you’ll use it. Within a few seconds, you’ll see multiple, competing offers from several lenders;
- You then shop and compare offers side by side.
Ready to get started? Find your best loan!
The bottom line is when it comes to buying a home for the first time, you should not take any shortcut. Doing so can cost a lot of money down the road. So before buying your first home, make sure you get the right mortgage loan, inspect the home, and have enough money to cover some of the upfront and ongoing costs associated with owning a house.
Speak with the Right Financial Advisor
Still looking for first time home buying tips? You can talk to a financial advisor who can review your finances and help you reach your goals (whether it is making more money, paying off debt, investing, buying a house, planning for retirement, saving, etc). Find one who meets your needs with SmartAssetâs free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.
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