First Time Homebuyer Mistakes
When looking to purchase a house for the first time, many people can find themselves completely lost with no clue where to begin. Based on a 2018 survey on “Homes.com” 40% of first-time homebuyers say it's the most stressful event of their entire lives. Here are some mistakes that must be avoided in order to ensure that your American dream doesn't turn into a nightmare:
Buying When in Debt: Needless to say, houses are expensive. Before taking on such a huge mortgage you're going to want to be completely unencumbered financially. A common scenario that we see in new homebuyers is buying a house when in debt and not having the money for repairs when something breaks within their new home. It is highly recommended to get rid of all debt including credit cards, student loans, and car loans. You should then look to build up an emergency fund that covers three to six months' worth of expenses, and finally save up for a down payment on your home.
Buying an Unaffordable House: It's important to know exactly what type of house you can afford before touring anything. Many times tricky lenders will pre-approve you for more money than is wise to spend. Mortgage payments that you can't afford can usually only be dealt with through very tedious methods like selling your home or moving. Make sure to take a look at how much money is coming in versus going out for you, and then look at how much of your income the monthly mortgage payments will take up.
Being Rushed by the Market: When mortgage rates are low, people tend to get excited about buying a home, and some make purchases without thinking twice. First time buyers will go for the first home they see based on what they hear about the housing market's state. This usually means they also fail to consider any financial responsibilities that will come in the future. Regardless of low interest rates and what not, if you don't have the money then it isn't the right time for you.
No Preapproval: When you are preapproved (which is different from being prequalified), the home-buying process becomes a little easier. These mortgage preapproval letters will show any sellers that you are very serious about buying a house. Along with this, any paperwork you receive will move along faster once an offer is accepted. These preapproval letters give you crucial information on how much money you can take from lenders, which will save you lots of stress financially in the coming years.
Picking a Low Quality Lender: A lot of homebuyers will disregard their lender options and focus on acquiring a top-notch real estate agent instead. Many seem to forget that a lender is your largest asset when it comes to money, so you want someone that can guide you through any twists and turns. A good lender should have your best interests in mind and offer many financial options to choose from. Bad signs for lenders would be you feeling rushed during the process, or them having no explanations behind their financial plans.