12 mistakes to avoid as a first-time home buyer

Contents
  1. 10 First-Time Homebuyer Mistakes | Interest.com
  2. 1. Not knowing how much you can afford
  3. 2. Speaking to only one lender
  4. 4. Making a down payment that’s too small
  5. 5. Buying too much (or too little) home compared to your needs
  6. 6. Underestimating your monthly payments
  7. 7. Taking out an adjustable-rate mortgage instead of a fixed-rate mortgage
  8. 9. Not getting pre-approved for a mortgage
  9. 10. Being too picky
  10. 12 mistakes to avoid as a first-time home buyer
  11. 1. Failing to check your credit report 
  12. 2. Not setting a budget
  13. 3. Saving up too little for a down payment
  14. 4. Forgetting to get a mortgage pre-approval letter
  15. 5. Neglecting to shop and compare rates
  16. 6. Overlooking programs such as FHA, USDA and VA loans
  17. 7. Draining your bank account
  18. 8. Applying for a loan or credit card before closing
  19. 9. Underestimating homeownership costs
  20. 10. Failing to take advantage of first-time homebuyer programs
  21. 11. Getting a mortgage you don't understand
  22. 12. Making decisions emotion
  23. What are today's mortgage rates?
  24. 12 First-Time Home Buyer Mistakes and How to Avoid Them
  25. 1. Not figuring out how much house you can afford
  26. 2. Getting just one rate quote
  27. 3. Not checking credit reports and correcting errors
  28. 4. Making a down payment that's too small
  29. 5. Not looking for first-time home buyer programs
  30. 6. Ignoring VA, USDA and FHA loan programs
  31. 7. Not knowing whether to pay discount points
  32. 8. Emptying your savings
  33. 9. Applying for credit before the sale is final
  34. 10. Shopping for a house before a mortgage
  35. 11. Underestimating the costs of homeownership
  36. 12. Miscalculating repair and renovation costs
  37. 1. Shopping for a house first before a mortgage
  38. 2. Not looking for first-time home buyer programs
  39. 3. Not hiring a buyer’s agent
  40. 4. Using up all of your savings
  41. 5. Ignoring a home’s drawbacks
  42. 6. Being indecisive
  43. 7. Overpaying for a house
  44. 8. Skipping the home inspection
  45. 9. Underestimating the costs of ownership
  46. 10. Miscalculating repair and renovation costs
  47. 11. Applying for credit before the sale is final
  48. 12. Missing the first mortgage payment

10 First-Time Homebuyer Mistakes | Interest.com

12 mistakes to avoid as a first-time home buyer

Buying your first home may be the biggest and most impactful financial decision in your lifetime. Before you buy, use these tips to avoid the most common homebuying mistakes.

If you’re buying your first home in 2020, you’re in a unique buying market. The number of people buying new houses each year has shrunk substantially over the past decade. There were 1.

8 million first-time homebuyers in 2016 compared to 2.13 million first-time homebuyers in 1997. That’s a significant drop, especially considering the U.S. population increased from 272.9 million in 1997 to 323.

4 million in 2016.

There are several ly reasons why fewer people are buying houses. Most analysts agree the millennial generation (those born between 1981 and 1996) have struggled to enter the housing market because they entered the workforce already burdened by overwhelming debt — primarily student loan debt, which stands at about $1.5 trillion.

The real estate market has also changed since the 2008 financial crisis. It can be difficult to find an affordable home near a job center a big city, and banks are more hesitant to lend to homebuyers they consider risky.

Nonetheless, there’s a great deal you can learn from the mistakes of the past. Here are 10 of the most common homebuyer mistakes to avoid as you search for your first home.

1. Not knowing how much you can afford

One of the first mistakes first-time homebuyers make is shopping for a home before they know how much they can afford.

You may have a rough idea of how much you’d to pay for a house — there’s usually a clear difference between a $300,000 home and a $500,000 home. But even a difference of a few thousand dollars can substantially change your monthly mortgage payments, especially if you can’t afford a reasonable down payment for a more expensive home.

According to Lior Rachmany, CEO of Dumbo Moving and Storage, “One of the most common mistakes homebuyers make is rushing to find a perfect home. The first thing you should be aware of when searching for homes is what you can or can’t afford.

Making a budget will help you in two ways. First, by having a budget set, you will [be] less ly to overspend your money.

On the other hand, a home-purchasing budget will help you narrow your search and look for the houses you are more ly to buy in the end.”

One of the easiest ways to get an accurate budget is to use a mortgage calculator.

Naturally, you need to know the size of the loan you can qualify for, but more important is calculating how much you can afford to pay in mortgage payments and other fees each month.

A mortgage calculator provides a rough idea of your monthly payments, so you can estimate the impact your mortgage, property taxes and other expenses will have on your monthly income.

2. Speaking to only one lender

It might seem easier to go straight to the personal bank you already use and ask them for a mortgage. This isn’t necessarily a bad instinct if you love your bank, but you shouldn’t stop there. One of the most common mistakes first-time homebuyers make is speaking to one lender and sticking with them.

Mortgage rates tend to be highly personalized, because they depend not only on market factors, but also on your personal finances. This also means lenders set rates they believe are appropriate. So, if you apply to multiple lenders, you could get different rates and fees from each.

This process allows you to select the mortgage with the lowest interest rate. You could even pit lenders against each other to see which gives you the best offer.

What’s in your credit report has a substantial impact on your ability to get a mortgage, as well on your interest rate while you repay it.

Most people know their credit score. If you don’t, there are plenty of apps that allow you to check your score for free. If your score is low, you may qualify for government-backed loans. But if you’re going with a traditional loan, you’ll want a score of at least 650 — preferably 700 or more.

According to the Federal Reserve, 90% of U.S. mortgages taken out in the first quarter of 2019 were by homebuyers who had a score of at least 650. Meanwhile, 75% of homebuyers had a score of 700 or more.

But your score isn’t the only thing you need to be concerned with on your credit report. It’s unly, but still possible there are errors on your report. These errors can impact your score, not to mention how lenders view your ability to repay a loan.

In 2013, a comprehensive study of consumer credit reporting by the FTC revealed 5% of consumers had errors on their credit reports. Unfortunately, even those consumers who did have errors on their credit reports failed to resolve the issue in subsequent years. A 2015 follow-up to this study revealed most consumers who previously had errors on their reports still had errors two years later.

According to the U.S. Federal Trade Commission, you are entitled to one free copy of your credit report every 12 months. If you haven’t already, order your free credit report from annualcreditreport.com.

4. Making a down payment that’s too small

If you’ve done any research on homebuying, you’ve ly learned about the 20% rule: If you put down at least 20% of the purchase price of your home, you can avoid private mortgage insurance (PMI) and save yourself on monthly costs.

While this is undoubtedly true, it doesn’t mean most people hit the 20% mark with their down payment. In fact, the average down payments is just 5.3% of the purchase price.

Nonetheless, this doesn’t mean you should save your cash and put the smallest amount down as you possibly can, either. It all depends on your mortgage and how much you can afford in monthly payments.

For example, if you want to purchase a $300,000 home, you may be able to afford a 5% down payment ($15,000) to do it. But you’ll need to take out a mortgage of $285,000. You’ll have to pay this amount over time, in addition to the interest that’s accrued on it and your mortgage insurance payment.

If you put 20% ($60,000) down, you’ll only need a mortgage of $240,000. You’ll accrue less interest, and you won’t need to pay PMI. The route you choose all depends on how much you can afford each month.

5. Buying too much (or too little) home compared to your needs

Finances aside, it’s possible to buy a home that is just too big for you. Or, for that matter, it’s possible to buy one that’s just too small.

Ron Humes, VP Operations, Southeast Region at Post Modern Marketing — and a former owner and principal broker of his own realty company for 20 years — shared, “Unfortunately, it is not uncommon to see homebuyers purchase a home only to realize that they cannot function in or maintain their home of choice. For some, it is more land than they care to maintain in their busy schedule. For others, they find that they are quickly bursting at the seams and need more room than the property allows.”

Thankfully, there’s an exercise you can do to avoid this mistake. Humes suggests doing the following: “Once you think you have nailed down your requirements for the size of your home and land, picture yourself living in that space throughout the course of a full year.

Consider all [the people] you will need to house, the possessions you will retain, and your schedule and lifestyle. Is the property manageable? If you can’t decide, you may wish to rent a similar size property first to see how it fits your lifestyle.

The cost of buying a home, selling it, and purchasing another is definitely worth investing the time.”

6. Underestimating your monthly payments

It’s not uncommon for first-time homebuyers to only factor their monthly mortgage payments into their monthly expenses. Unfortunately, there are other monthly expenses you need to consider when you move from a rental property to your own home.

In addition to loan payments, you also need to pay property taxes. These vary widely by state and county, so you’ll need to look up your area to determine your tax rate. According to The Tax Foundation, the lowest tax rates are in 13 counties that have a median property tax of less than $200 per year, but the most expensive counties have median tax rates of over $10,000 per year.

You also need to factor in the cost of homeowners insurance, which averaged $1,173 per year in 2015. You’ll also have to cover utilities electricity, water, trash pickup and possibly gas. Depending on where you live, you may also need to pay HOA fees, and you should expect to pay at least some amount each year for general maintenance.

7. Taking out an adjustable-rate mortgage instead of a fixed-rate mortgage

If you don’t have tons of cash lying around, you have two options when taking out a mortgage: an adjustable-rate mortgage (ARM) or a fixed-rate mortgage. You can get each type in varying repayment periods, such as 10, 15 or 20 years. But the most common term for a fixed-rate mortgage is 30 years.

A fixed-rate mortgage has an interest rate that is just that: fixed. It doesn’t change for the duration of your mortgage term. This is the most popular type of mortgage. It’s favored by homebuyers because it makes it easier to calculate monthly costs and there is no risk that a monthly mortgage payment will change.

With an ARM, you can usually lock in a low, fixed interest rate for a few years. After that, however, your rate is adjusted a market index, so it changes with the stock market.

While you could potentially pay less with an ARM when the market is good, you could also potentially pay more — a lot more — if the market isn’t working in your favor.

This could potentially increase your monthly payments to levels you can’t afford.

ARMs were immensely popular in the early 2000s, and many experts assign some blame to them for the housing bubble and the 2008 financial crisis. They often become attractive to borrowers when interest rates are high. But they are usually only a good option for investors who only intend to hold real estate for a short period of time before selling it.

If you intend to stay in your home, you should assume the market will turn at some point and that interest rates will go up. Unless you’re willing to take the gamble, you’re usually safer with a fixed-rate mortgage.

You should never purchase a home without an inspection. In many cases, you can gather that information for a fee. But if you’re buying a foreclosure, you should pay for an inspection yourself as you are ly purchasing the home “as is.”

James Dwyer of Engel & Voelkers Halifax said, “The most important money you will ever spend on a home will be the first $1,000 — gathering information from the home inspection, sewer scopes, radon tests, water tests, etc. [This] will help buyers make informed, educated decisions on buying a home information rather than desire.”

If you purchase a home as-is and it has livability issues, you’ll be responsible for fixing them yourself.

9. Not getting pre-approved for a mortgage

If you get pre-approved for a mortgage before you go home shopping, you’ll do so armed with some important benefits. You’ll have peace of mind in knowing you’ve already secured financing. You may also have some bargaining and negotiating power, since sellers are more ly to go with someone they know can pay.

Of course, one of the main benefits of pre-approval is knowing exactly how much you can afford. Benjamin Ross, founder of My Active Agent said, “Buying real estate is not the same as buying a TV at your local retailer.

By getting pre-approved, you know exactly how much you can spend and what type of property you can possibly buy. Doing this will save you lots of wasted time and heartache [from] looking at property you are not able to buy even if you wanted.

If you are not able to get prequalified, you know you must work on your credit before even thinking about looking at houses.”

10. Being too picky

Finally, first-time homebuyers tend to be pickier about their purchase than second- and third-time homebuyers. This may be difficult for you to avoid. You’re buying your first home. You’ll probably live in it for a long time and you don’t want to be stuck with a home that you hate.

Just keep this in mind: nothing is as permanent as it seems.

Rick Albert, Broker Associate at LAMERICA Real Estate attests that “no home is perfect, but more often than not, changes can be made now or later on.” When looking a homes, he recommends homebuyers “focus more on location, affordability, and if it generally has what you want.”

If you’ve ever watched house-hunting reality TV shows, you should already know nobody ever gets everything on their list when searching for a home, and that’s okay. The money you save today could be saved for home improvements tomorrow. You may even discover things about your new home that you never expected to love.

Buying your first home

Buying your first home isn’t a simple process. You may wish to work with a realtor or financial professional to ensure you don’t make any mistakes. They can also walk you through the process and answer your questions. But as long as you can avoid the above challenges, you should be well on your way to buying a home you both love and can afford.

Источник: https://www.interest.com/mortgage/10-first-time-homebuyer-mistakes/

12 mistakes to avoid as a first-time home buyer

12 mistakes to avoid as a first-time home buyer

Buying your first home is an exciting milestone, but the choice to become a homeowner isn't one to take lightly.

For most people, their home is their most valuable asset while their mortgage is their largest financial commitment. Because of that, you can't afford to make first-time homebuyer mistakes. The good news is, avoiding them is easy if you know the mortgage myths inexperienced buyers often believe and the pitfalls first-time buyers often fall into.

Here are 12 of them to watch out for.

1. Failing to check your credit report 

For most lenders, your credit score is one of the most important factors in determining if you'll be approved for a home mortgage — and it also plays a huge role in determining the rate you'll pay to borrow.

To avoid end up paying more or being denied a loan, check your credit report and score early in the process. If there are errors on your report, you'll have time to correct them. And if your score is lower than you'd , you may decide to wait and work on improving it before you buy.

If you already know your credit score, you can plug your information into Credible's free tool to see what kind of mortgage you can afford.

HOW TO GET A FREE CREDIT REPORT

2. Not setting a budget

One of the most common first-time homebuyer mistakes is not being clear on how much you can afford. After all, you don't want to waste time looking at houses that are outside your price range or fall in love with a home that's too much of a stretch.

Use a mortgage calculator to find out what your monthly payment would be how much you borrow so you can make sure your payment fits within your monthly budget. Ideally, you won't spend more than 30 percent of income on all your housing-related costs.

The best place to start when making mortgage decisions is to compare rates and lenders via an online tool  Credible.

5 MYTHS ABOUT CREDIT SCORES FOR FIRST-TIME HOME BUYERS

3. Saving up too little for a down payment

While you don't have to put 20 percent down on a home, you'll generally pay extra costs for private mortgage insurance if you don't. PMI is expensive and it doesn't help you — it just protects your lender in case you default. Aim to save at least 20 percent of your home's price to avoid this added expense.

WHAT IS PMI AND HOW DOES IT WORK?

4. Forgetting to get a mortgage pre-approval letter

Knowing in advance how much you can borrow — and that you can qualify for a loan — is important. Fortunately, you can get pre-approved early in the process by providing some basic financial information.

A pre-approval letter gives you a clear idea of what the terms of your loan will be. And many sellers require you to submit one if you make an offer.  Fortunately, you can visit an online mortgage broker Credible to get personalized rates and pre-approval letters without impacting your credit score.

HOW TO GET PRE-APPROVED FOR A MORTGAGE

5. Neglecting to shop and compare rates

Mortgage loan rates vary substantially from one lender to another and you want to make sure you get a loan at the most competitive rate. To do that, get quotes from multiple mortgage loan providers.

Credible makes it easy to compare rates and lenders in just a few minutes, so visit the site to shop around.

HOW TO FIND THE BEST MORTGAGE RATES DURING CORONAVIRUS

When you compare rates, read the fine print so you'll know you're looking at similar loans. If two lenders appear to be charging the same rate but one requires you to buy mortgage points, it's actually much more expensive.

6. Overlooking programs such as FHA, USDA and VA loans

To help more families achieve the dream of homeownership, various federal government agencies back mortgage loans. Loans insured by the FHA, USDA, and VA, are made by private lenders but can be much easier to qualify for. If you don't have much money for a down payment or your credit isn't perfect, it's especially important to check into them.

7. Draining your bank account

Buying a home can be expensive, especially when factoring in your down payment and closing costs. Unfortunately, many first-time buyers spend nearly all their cash to get into their home, forgetting about moving expenses, furniture, and other ownership costs.

You don't want to spend every last dollar and have nothing left to cover emergency repairs or other expenses so be sure you have some extra cash set aside.

8. Applying for a loan or credit card before closing

When you get approved for a mortgage, lenders look at your debt to income ratio. If you borrow money before you close on your home, this could cause problems because you'll have higher debt costs than when you were approved. You could also end up lowering your credit score by opening a new loan.

You don't want to risk not being able to get the mortgage you were pre-approved for, or making your loan more expensive, so don't apply for any new credit until you've signed the papers and your home is officially yours.

9. Underestimating homeownership costs

Homeownership comes with lots of costs you may not think about as a first-time buyer. You'll have property taxes, insurance, and potentially homeowners association fees. You may have higher utility bills and you'll also be responsible for ongoing maintenance costs and repairs.

Think about all of these expenses before you decide that you're financially ready to become a homeowner.

10. Failing to take advantage of first-time homebuyer programs

Programs for first-time homebuyers are offered by some states, cities, lenders, and nonprofits. Some may help you get money for a down payment or make getting approved for a loan easier. They're worth looking into.

11. Getting a mortgage you don't understand

There are many different types of mortgage loans, including fixed-rate mortgages with payments that remain the same for the life of the loan as well as adjustable-rate mortgages with interest rates that can change over time. To make sure you don't get the wrong type of loan for you, don't apply for a mortgage unless you understand exactly what your payment obligations will be for the life of the loan.

You can visit Credible to get in touch with experienced loan officers and get all your mortgage questions answered.

THIS MORTGAGE RATE MISTAKE COULD COST YOU THOUSANDS

12. Making decisions emotion

Many people fall in love with a home and want to make it theirs. But you don't want to buy a home that's too expensive or a poor value because you're acting emotions. Remember, your home is an investment as well as the place you live so make a smart financial choice.

What are today's mortgage rates?

Now that you know some of the most common first-time homebuyer mistakes to avoid, you can start shopping for your loan. The good news is, mortgage rates are near record lows.

In fact, according to Freddie Mac, the average interest rate on a 30-year fixed-rate mortgage is just 2.99 percent for the week ending July 30. This a bit lower than the average interest rate of 3.01 percent last week and well below the 3.75 percent average rate buyers faced last year.

With the Federal Reserve setting benchmark rates to zero percent to stimulate the economy during the coronavirus crisis, now is a good time to score a low interest loan. Visit Credible today to get pre-approved and see your rates.

Источник: https://www.foxbusiness.com/money/mistakes-to-avoid-first-time-homebuyer

12 First-Time Home Buyer Mistakes and How to Avoid Them

12 mistakes to avoid as a first-time home buyer

Every year, first-time home buyers venture into the market and make the same mistakes that their parents, siblings and friends made when they bought their first houses.

But today’s novice buyers can stop the cycle. Here are 12 mistakes that first-time home buyers make — and what to do instead.

Get answers to questions about your mortgage, travel, finances — and maintaining your peace of mind.

1. Not figuring out how much house you can afford

Without knowing how much house you can afford, you might waste time. You could end up looking at houses that you can't afford yet, or visiting homes that are below your optimal price level.

For many first-time buyers, the goal is to buy a house and get a loan with a comfortable monthly payment that won't keep them up at night. Sometimes it's a good idea to aim low.

How to avoid this mistake: Use a mortgage affordability calculator to help you know what price range is affordable, what's a stretch and what's aggressive.

» CALCULATE: How much house can I afford?

2. Getting just one rate quote

Shopping for a mortgage is shopping for a car or any other expensive item: It pays to compare offers. Mortgage interest rates vary from lender to lender, and so do fees such as closing costs and discount points.

“Mortgage applications within 45 days count as one credit inquiry.”

But according to the Consumer Financial Protection Bureau, almost half of borrowers don't shop for a loan.

» MORE: 5 tips for finding the best mortgage lenders

How to avoid this mistake: Apply with multiple mortgage lenders. A typical borrower could save $430 in interest just in the first year by comparing five lenders, NerdWallet finds. All mortgage applications made within a 45-day window will count as just one credit inquiry.

3. Not checking credit reports and correcting errors

Mortgage lenders will scrutinize your credit reports when deciding whether to approve a loan and at what interest rate. If your credit report contains errors, you might get quoted an interest rate that's higher than you deserve. That's why it pays to make sure your credit report is accurate.

See your free score anytime, get notified when it changes, and build it with personalized insights.

4. Making a down payment that's too small

You don't have to make a 20% down payment to buy a home. Some loan programs (see item No. 5) enable you to buy a home with zero down or 3.5% down. Sometimes that's a good idea, but homeowners occasionally have regrets.

In a survey commissioned by NerdWallet, one in nine (11%) homeowners under age 35 agreed with the statement “I should have waited until I had a bigger down payment.” It was one of the most common regrets that millennial homeowners had.

“The key is making sure your down payment secures an affordable monthly house payment.”

How to avoid this mistake: Figuring out how much to save is a judgment call. A bigger down payment lets you get a smaller mortgage, giving you more affordable monthly house payments.

The downside of taking the time to save more money is that home prices and mortgage rates have been rising, which means it could become more difficult to buy the home you want and you may miss out on building home equity as home values increase.

The key is making sure your down payment helps you secure a payment you’re comfortable making each month.

» MORE:  Down payment strategies for first-time home buyers

In another survey commissioned by NerdWallet, millennial homeowners described how long it took to save for a down payment. Among millennials who had bought a home in the previous five years, it took an average of 3.75 years to save enough to buy. So if it's taking you three or four years to save up, you have plenty of company.

» MORE: How to figure out the right down payment amount for you

5. Not looking for first-time home buyer programs

As a first-time home buyer, you probably don’t have a ton of money saved up for the down payment and closing costs.

But don’t make the error of assuming that you have to delay homeownership while saving for a huge down payment.

There are plenty of low-down-payment loan programs out there, including state programs that offer down payment assistance and competitive mortgage rates for first-time home buyers.

Yes, 11% of millennial homeowners say they regret not making a bigger down payment. But the vast majority don't express such a regret.

» MORE: Learn about first-time home buyer resources in your state

How to avoid this mistake: Ask a mortgage lender about your first-time home buyer options and look for programs in your state. You might qualify for a U.S.

Department of Agriculture loan or one guaranteed by the Department of Veterans Affairs that doesn’t require a down payment. Federal Housing Administration loans have a minimum down payment of 3.

5%, and some conventional loan programs allow down payments as low as 3%.

» MORE: Find a first-time home buyer program that’s right for you

6. Ignoring VA, USDA and FHA loan programs

A lot of first-time home buyers want to or need to make small down payments. But they don't always know the details of government programs that make it easy to buy a home with zero or little down.

How to avoid this mistake: Learn about the following loan programs:

  • VA loans are mortgages guaranteed by the U.S. Department of Veterans Affairs. They're for people who have served in the military. VA loans' claim to fame is that they allow qualified home buyers to put zero percent down and get 100% financing. Borrowers pay a funding fee in lieu of mortgage insurance.» MORE: The basics of VA loans
  • USDA loans can be used to buy homes in areas that are designated rural by the U.S. Department of Agriculture. Qualified borrowers can put zero percent down and get 100% financing. You pay a guarantee fee and an annual fee in lieu of mortgage insurance.» MORE: What you need to know about USDA loans
  • FHA loans allow for down payments as small as 3.5%. What's more, the Federal Housing Administration can be forgiving of imperfect credit. When you get an FHA loan, you pay mortgage insurance for the life of the mortgage, even after you have more than 20% equity.» MORE: All about FHA loans

7. Not knowing whether to pay discount points

Mortgage discount points are fees you pay upfront to reduce your mortgage interest rate. Interest rate savings can add up to a lot of money over the life of a mortgage, and discount points are one way to gain those rate savings if you’re in the right position to purchase them.

How to avoid this mistake: If making a minimal down payment is an accomplishment, the choice is simple: Don't buy discount points.

If you have enough cash on hand, the value of buying points depends on whether you plan to live in the home longer than the “break-even period.

” That's the time it takes for the upfront cost to be exceeded by the monthly savings you get from a lower interest rate.

» MORE: Calculate whether you should pay for discount points

8. Emptying your savings

If you buy a previously owned home, it almost inevitably will need an unexpected repair not long after. Maybe you’ll need to replace a water heater or pay a homeowner's insurance deductible after bad weather.

“That’s a growing pain for the first-time homeowner, when stuff breaks,” says John Pataky, executive vice president of the consumer division of EverBank. “They find themselves in a hole quickly,” if they don't have enough saved for emergencies.

» MORE: How to save for a down payment

How to avoid this mistake: Save enough money to make a down payment, pay for closing costs and moving expenses, and take care of repairs that may come up. Lenders will give you estimates of closing costs, and you can call around to get estimates of moving expenses.

» MORE: Calculate how long it will take you to save for a down payment

9. Applying for credit before the sale is final

One day, you apply for a mortgage. A few weeks later, you close, or finalize, the loan and get the keys to the house. The period between is critical: You want to leave your credit alone as much as possible. It’s a mistake to get a new credit card, buy furniture or appliances on credit, or take out an auto loan before the mortgage closes.

“Wait until after closing to open new credit accounts or charge big expenses to your credit cards.”

Here’s why: The lender’s mortgage decision is your credit score and your debt-to-income ratio, which is the percentage of your income that goes toward monthly debt payments.

Applying for credit can reduce your credit score a few points. Getting a new loan, or adding to your monthly debt payments, will increase your debt-to-income ratio.

Neither of those is good from the mortgage lender’s perspective.

» MORE: Why debt-to-income ratio matters

Within about a week of the closing, the lender will check your credit one last time. If your credit score has fallen, or if your debt-to-income ratio has gone up, the lender might change the interest rate or fees on the mortgage. It could cause a delay in your closing, or even result in a canceled mortgage.

How to avoid this mistake: Wait until after closing to open new credit accounts or to charge furniture, appliances or tools to your credit cards. It’s OK to have all those things picked out ahead of time; just don’t buy them on credit until after you have the keys in hand.

» MORE: What not to do during mortgage approval

10. Shopping for a house before a mortgage

It’s more fun to look at homes than it is to talk about your finances with a lender.

So that’s what a lot of first-time home buyers do: They visit properties before finding out how much they are able to borrow.

Then, they are disappointed when they discover they were looking in the wrong price range (either too high or too low) or when they find the right home, but aren’t able to make a serious offer.

» MORE: Calculate the estimated value of a home you're interested in

How to avoid this mistake: Talk to a mortgage professional about getting pre-qualified or even preapproved for a home loan before you start to seriously shop for a place. The pre-qualification or preapproval process involves a review of your income and expenses, and it can make your bid more competitive because you’ll be able to show sellers that you can back up your offer.

Neal Khoorchand, broker-owner of Century 21 Professional Realty in the South Ozone Park neighborhood of Queens, New York, pre-qualifies his clients before showing them properties.

“If you’re qualified for a one-family house for $500,000, we’re not going to show you a one-family for $600,000 — it would be a waste of time,” he says.

» MORE: What a preapproval is and why it matters

11. Underestimating the costs of homeownership

After you buy a home, the monthly bills keep stacking up. This can come as a surprise if you’re not ready.

“It’s not just your mortgage payment,” says Seth Feinman, vice president of Silver Fin Capital, a mortgage brokerage in Great Neck, New York. “You’re going to have the oil bill, the gas bill, you’re going to have a cable bill, you’re going to have all these things that the bank doesn’t care about when qualifying you for a mortgage.”

Renters often pay these kinds of bills, too. But a new home could have higher costs — and it might come with entirely new bills, such as homeowner association fees.

How to avoid this mistake: Work with a real estate agent who can tell you how much the neighborhood’s property taxes and insurance typically cost. Ask to see the seller’s utility bills for the last 12 months the home was occupied so you have an idea how much they will cost after you move in.

» MORE: Calculate the real costs of owning a home

12. Miscalculating repair and renovation costs

First-time home buyers are frequently surprised by high repair and renovation costs. Buyers can make two mistakes: First, they get a repair estimate from just one contractor, and the estimate is unrealistically low. Second, their perspective is distorted by reality TV shows that make renovations look faster, cheaper and easier than they are in the real world.

How to avoid this mistake: Assume that all repair estimates are low. James Ramos, owner of Re/Max Bay to Bay, a real estate brokerage in Tampa, Florida, recommends doubling the estimates to get a more realistic view of costs.

Seek more than one estimate for expensive repairs, such as roof replacements. A good real estate agent should be able to give you referrals to contractors who can give you estimates. But you also should seek independent referrals from friends, family and co-workers so you can compare those estimates against ones you receive from contractors your agent refers.

» MORE: Why you should budget for repairs even before you buy

Источник: https://www.nerdwallet.com/article/mortgages/first-time-home-buyer-mistakes-that-are-easy-to-avoid

1. Shopping for a house first before a mortgage

Talk to a mortgage professional about getting pre-qualified or even preapproved for a home loan before you start to seriously shop for a place.

It’s more fun to look at homes than it is to talk about your finances with a lender.

So that’s what a lot of first-time home buyers do: They visit properties before finding out how much they are able to borrow.

Then, they are disappointed when they discover they were looking in the wrong price range (either too high or too low) or when they find the right home, but aren’t able to make a serious offer.

How to avoid this mistake: Talk to a mortgage professional about getting pre-qualified or even preapproved for a home loan before you start to seriously shop for a place.

The pre-qualification or preapproval process involves a review of your income and expenses, and it can make your bid more competitive because you’ll be able to show sellers that you can back up your offer.

(See what a preapproval is and why it matters.)

Neal Khoorchand, broker-owner of Century 21 Professional Realty, in the South Ozone Park neighborhood of Queens, New York, pre-qualifies his clients before showing them properties.

“If you’re qualified for a one-family house for $500,000, we’re not going to show you a one-family for $600,000 — it would be a waste of time,” he says.

2. Not looking for first-time home buyer programs

As a first-time home buyer, you probably don’t have a ton of money saved up for the down payment and closing costs. But don’t make the error of assuming that you have to delay homeownership while saving for a huge down payment. There are plenty of low-down-payment loan programs out there.

How to avoid this mistake: Ask a mortgage lender about your options. You might qualify for a Veterans Administration or U.S. Department of Agriculture loan that doesn’t require a down payment. Federal Housing Administration loans have a minimum down payment of 3.5%, and some conventional loan programs allow down payments as low as 3%.

3. Not hiring a buyer’s agent

Work with an exclusive buyer’s agent, someone who has a duty to work in your best interests.

Some home buyers make the mistake of working directly with the seller’s real estate agent, who is obligated to secure the best price and terms for the seller. As a novice home buyer, you could be overmatched when negotiating with an experienced agent who’s working on the seller’s behalf.

How to avoid this mistake: Work with an exclusive buyer’s agent, who has a duty to work in your best interests. (See NerdWallet’s guide to finding a buyer’s agent.)

4. Using up all of your savings

If you buy a previously owned home, it almost inevitably will need an unexpected repair not long after. Maybe you’ll need to replace a water heater, repair a crack in the chimney or get rid of hidden mold.

“That’s a growing pain for the first-time homeowner, when stuff breaks,” says John Pataky, executive vice president of the consumer division of EverBank. “If they don’t have enough in back reserves, emergency funds, they find themselves in a hole quickly.”

How to avoid this mistake: Save enough money to make a down payment, pay for closing costs and moving expenses, and take care of unexpected expenses. This is easier said than done. But you can buy a home with a down payment of much less than 20%, allowing you to conserve your savings. (Find out how much down payment you need to buy a home.)

5. Ignoring a home’s drawbacks

Write a list of the attractive and the unattractive qualities of each house, and pay attention to each home’s downsides.

A lot of first-time home buyers fall in love with one of the first properties they look at. They ignore the negatives of the house and its neighborhood.

But you can’t disregard the downsides forever. For example, you might think you’ll be OK with a long commute, but after a few months of spending too many hours stuck in traffic, you’ll wish you had bought a house closer to work.

How to avoid this mistake: Do two things. First, resolve to visit “10, 15, 20 houses” before making an offer, Khoorchand says, so you’ll be less ly to fall in love with the first or second or third home you look at.

Second, write a list of the attractive and the unattractive qualities of each house, and pay attention to each home’s downsides.

6. Being indecisive

The flip side of choosing a place too quickly is acting too slowly when you find the right home. In a market with more buyers than sellers, you have to move fast.

Khoorchand says he can talk all day about clients who “needed some time to think about it” and made an offer two or three days after viewing a house, only to discover that another buyer had swooped in and made a successful offer.

How to avoid this mistake: “Once you look at multiple houses, and you get a feel of the market and you know what the market is and where the prices are at, and you see something you , don’t hesitate to make an offer, because you and 10 other people will be interested in that same property,” Khoorchand says.

7. Overpaying for a house

First-time home buyers tend to pay more than experienced buyers would pay for the same house, according to research conducted by two economists with the Federal Housing Finance Agency.

In their analysis of appraisal data from more than 1.7 million home sales, FHFA economists Jessica Shui and Shriya Murthy concluded that first-timers overpay by an average of 0.

79%, which was nearly $2,200 per house, according to the data set they examined.

Shui and Murthy pointed to the inexperience of first-time home buyers. Real estate agents say newbie buyers let their emotions take over, too. “You tend to overlook potential negatives and only look at the positives of a particular house,” says Jim Murrett, president of the Appraisal Institute, an association of real estate appraisers.

How to avoid this mistake: Ask your agent for a competitive market analysis, a report that looks at the prices of comparable nearby homes that have been sold recently. And it helps to fully understand the real estate process, so seek homebuying advice from a certified HUD housing counselor.

8. Skipping the home inspection

It’s a mistake to buy a previously owned home without an inspection because there could be expensive, hidden damage.

In some markets, a lot of buyers compete for a small number of properties for sale. In these strong seller’s markets, buyers are tempted to waive a home inspection. It gives them a competitive edge over smarter buyers who wouldn’t dream of forgoing an inspection before plunking down hundreds of thousands of dollars for a home.

It’s a mistake to buy a previously owned home without an inspection because there could be expensive, hidden damage that you wouldn’t spot but an inspector would.

How to avoid this mistake: Simple: Hire a licensed home inspector. Your real estate agent will gladly make a recommendation, but it’s better to hire an inspector of your own choosing who doesn’t depend on your agent for referrals. The American Society of Home Inspectors (homeinspector.org) has an inspector search tool.

9. Underestimating the costs of ownership

After you buy a home, the monthly bills keep stacking up. This can come as a surprise if you’re not ready.

“It’s not just your mortgage payment,” says Seth Feinman, vice president of Silver Fin Capital, a mortgage brokerage in Great Neck, New York. “You’re going to have the oil bill, the gas bill, you’re going to have a cable bill, you’re going to have all these things that the bank doesn’t care about when qualifying you for a mortgage.”

Renters often pay these kinds of bills, too. But the new home could have higher costs — and it might come with entirely new bills, such as homeowner association fees.

How to avoid this mistake: Work with a real estate agent who can tell you how much the neighborhood’s property taxes and insurance typically cost. Ask to see the seller’s utility bills for the last 12 months the home was occupied so you have an idea how much they will cost after you move in.

10. Miscalculating repair and renovation costs

Assume that all home repair estimates are low. Seek more than one estimate for expensive repairs, such as remodeling.

First-time home buyers are frequently surprised by high repair and renovation costs. Buyers can make two mistakes: First, they get a repair estimate from just one contractor, and the estimate is unrealistically low. Second, their perspective is distorted by reality TV shows that make renovations look faster, cheaper and easier than they are in the real world.

How to avoid this mistake: Assume that all repair estimates are low. James Ramos, owner of Re/Max Bay to Bay, a real estate brokerage in Tampa, Florida, recommends doubling the estimates to get a more realistic view of costs.

Seek more than one estimate for expensive repairs, such as roof replacements. A good real estate agent should be able to give you referrals to contractors who can give you estimates. But also seek independent referrals from friends, family and co-workers so you can compare those estimates against ones you receive from contractors your agent refers.

11. Applying for credit before the sale is final

It’s a mistake to get a new credit card, buy furniture or appliances on credit or take out an auto loan before a mortgage closes.

One day, you apply for a mortgage. A few weeks later, you close, or finalize, the loan and get the keys to the house. The period between is critical: You want to leave your credit alone as much as possible. It’s a mistake to get a new credit card, buy furniture or appliances on credit or take out an auto loan before the mortgage closing.

Here’s why: The lender’s mortgage decision is your credit score and your debt-to-income ratio, which is the percentage of your income that goes toward monthly debt payments.

Applying for credit can reduce your credit score a few points. Getting a new loan, or adding to your monthly debt payments, will increase your debt-to-income ratio.

Neither of those is good from the mortgage lender’s perspective.

Within about a week of the closing, the lender will check your credit one last time. If your credit score has fallen, or if your debt-to-income ratio has gone up, the lender might change the interest rate or fees on the mortgage. It could cause a delay in your closing, or even result in a canceled mortgage.

How to avoid this mistake: Wait until after closing to open new credit accounts or to charge furniture, appliances or tools to your credit cards. It’s OK to have all those things picked out ahead of time; just don’t buy them on credit until after you have the keys in hand.

12. Missing the first mortgage payment

Sounds hard to believe, but it’s not rare for new homeowners to be late with their first monthly payment, or to miss it altogether, says Neil Garfinkel, a real estate attorney with Abrams Garfinkel Margolis Bergson in New York City.

“Maybe you didn’t fully understand the process. You thought it was being auto-deducted but it’s not being auto-deducted. You didn’t get the bill in the mail. Whatever.

Those first couple of payments, from a credit perspective, are really, really important,” he says.

How to avoid this mistake: At the real estate closing, ask when the first mortgage payment will be due and write it down. Ask how you will receive notice that the payment is due: A coupon book? A letter in the mail? An email or a text? Then, look out for that notification.

In many cases, the mortgage servicer — the company that bills you, collects the payments and makes sure the principal, interest, taxes and insurance all go to the right places — will mail you a welcome letter with these details.

The article 12 First-Time Home Buyer Mistakes and How to Avoid Them originally appeared on NerdWallet.

Источник: http://www.trendinghomenews.com/2018/03/12-first-time-home-buyer-mistakes-avoid/

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