As a first time homebuyer, you are about to embark on a journey filled with new terminology, major decisions, and big milestones. It’s normal to feel overwhelmed, but there’s no need to stress out.
Keep reading for a list of common first time home buyer mistakes to avoid.
1. Looking for a Home without Pre-Approval
The first step in the home buying process should always be getting pre-approved. One of the most common first time homebuyer mistakes to avoid is looking at home, whether online or with an agent, without knowing how much you can spend.
Before you do anything else, get started with a few lenders to find out how much your monthly payment will be, what price range you’re comfortable shopping in, and what interest rate you can expect on your loan.
Without pre-approval, you might:
- Fall in love with a property that sells to someone else before you can put it in an offer
- Spend time looking at properties that are significantly over or under budget
- Struggle to find an experienced real estate agent who will work with you (they know they may be wasting their time)
Getting pre-approved is not a difficult process! Shopping for a house without it is one of the biggest first time homebuyer mistakes you can make.
2. Draining Your Savings
If you have been saving for your first home, you have likely set yourself up for success and have many options available to you.
Keep in mind that it isn’t always in your best interest to drain your savings in order to have a higher down payment percentage or raise your overall budget. Even if it means a lower budget or paying PMI, keeping a sizable emergency fund (ideally three to six months of living expenses) is something financial experts agree will be in your best interest.
3. Opening New Credit Accounts During Escrow
One of the easiest first time homebuyer mistakes to avoid is opening new credit accounts during escrow.
Remember: pre-approval doesn’t mean your credit score won’t matter anymore.
Your lender’s underwriters will check your credit again before closing, and the opening of new credit accounts will be a red flag. It’s tempting to buy new appliances or furniture for your new home, but remember that any change to your DTI (Debt-to-Income Ratio) or credit score might change your approval status, so wait until after closing.
5. Focusing on the House more than its Location
When you make your first home wish list, don’t forget to think about the location of the home as you add items to the list. One first time homebuyer mistake many people make is buying a house they love in a location they don’t.
Remember: the location of the home is one of the only things you can’t change.
When considering the location of the home, think about:
- Work commute(s)
- Distance to your doctors, hobbies, etc.
- Type of neighborhood
- School district the home is in
- Crime rate in the area
- Walkability
- Community amenities
6. Assuming You Must Put 20% Down
One of the most common first time homebuyer mistakes is assuming you will need 20% down in order to buy a home. With all of the mortgage options available, this simply isn’t true.
If you have good credit and verifiable income, you may be surprised at the down payment options available to you! Ask your lender about FHA, Conventional, USDA, and VA loan options, and what your down payment would be on each of these. You may be able to put as little as 3% down! The more options you are aware of, the better prepared you can be to get the mortgage that is right for you.
It is normal to feel overwhelmed by the home buying process, and one of the biggest first time homebuyer mistakes you can make is trying to figure it all out on your own. Reach out to us to see how we can help you become a homeowner!
More Tips for Home Buyers
DSCR Loans for Real Estate Investors
What is Asset Qualifier Mortgages?
How Much Can I Save By Having Good Credit?
What is the Minimum Down Payment for a House
6 Things Home Buyers Should Do Before Applying for a Home Loan
