Modus Mortgage

Mistakes First-Time Home Buyers Must Avoid

There are several common errors made by first-time homebuyers. Some are little, while others may be rather pricey. Fortunately, many of these errors may be avoided. This article will educate first-time home buyers so that they can avoid making these typical mistakes.

Mistake #1: Going House Hunting Before Getting Pre-Approved

When you browse for a home before getting pre-approved, you risk falling in love with a property that’s out of your price range, essentially spoiling the entire home-buying process before it even begins.

Instead, prioritize your finances. Before you go house hunting, make sure you have enough money saved for a down payment and closing costs, as well as a pre-approval letter.

Mistake #2: Buying More Than You Can Comfortably Afford

Many people mistakenly assume that the loan amount they have been approved for correctly reflects the amount of home they can afford. However, lenders don’t take into consideration your monthly costs like food, electricity, gas, or insurance when determining eligibility based on your income and debt-to-income ratio. Instead, begin by calculating your real “home-owning” budget with the amount you’ve been pre-approved for.

Mistake #3: Only Considering Conventional Loans

Because the conventional loan is the most well-known, many people overlook the excellent borrowing options provided by VA, USDA, and FHA loans. Because these government-backed loans are frequently more cheap, failing to inquire about them might result in large savings.

Here’s are these loans in a nutshell:

  • VA loan – permits you to qualify even if your credit score is poor and your debt is high. It may not require a down payment or the purchase of mortgage insurance. Only individuals with a Certificate of Eligibility from the VA are eligible.
  • USDA loan – No down payment required and may be able to roll closing costs into the loan. 
  • FHA loan – Beneficial for those who may have trouble qualifying for other loans. Qualify with a credit score as low as 580 and a 3.5% down payment.

Mistake #4: Using all Your Savings for a Down Payment

Don’t be tempted to deplete your resources in order to put a down payment on a house! Owning a house comes with a slew of unforeseen expenses. So, if you don’t have money set aside to cover these costs, you’re putting yourself in a serious financial bind that might lead to you being unable to make your mortgage payments.

Mistake #5: Forgetting Moving Costs

With everything that goes into buying a property, many first-time homebuyers overlook the costs of relocating. As you begin looking for a house, begin saving for moving expenses such as boxes, packing tape, packing blankets, bubble wrap, truck rental, and labor.

Mistake #6: Applying for New Credit Before Closing

Lenders examine your credit not just throughout the pre-approval process, but also on the day of your scheduled closing. As a result, if you request for credit before the loan is closed, your approval may be affected. Instead, wait until after you’ve closed to create any new credit lines. Also, don’t shut any accounts or miss any payments, as both of these things might hurt your credit score.

Let us help you get pre-approved and start your house purchasing adventure now that you’ve learned some first-time home buyer recommendations and know what pitfalls to avoid.

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