Buying your first home is always exciting. It can also be nerve-racking, stressful, confusing, and expensive. Before you sign that Letter of Agreement, be sure you understand what you’re getting yourself into, and avoid these common mistakes made by first-time home buyers.
You don’t engage a buyer’s real estate professional. The sellers have a real estate professional to guide them and you should, too. They have the agent who showed you the house (the listing agent). That agent is paid by the seller, and therefore, works for the seller. She may be friendly, cordial, and knowledgeable, but the selling agent still works for the sellers. Get your own professional to hold your hand through the process.
It doesn’t cost you anything to have a licensed agent looking at properties on your behalf because the agents split the commission. But now you have an insider working for your benefit.
You fail to create a home-buying budget. Before you cross the threshold of your first walk-through, know how much home you can afford without blowing the budget to bits. In many cases, you start with a number in mind, but when you see what an extra $50,000 gets you, you may stretch yourself thin and have a hard time keeping up with monthly mortgage payments.
Decide how much you are comfortable owing. Don’t buy the biggest house you can afford and max out your household income. Instead, find the home that suits your family’s housing needs, enough bedrooms, enough bathrooms, a fenced-in yard.
Where’s the down payment coming from? Are you being gifted money from family? How much can you afford to pay upfront for down payment, closing costs and other expenses that need to be paid before you get your house keys? Make a budget for those as well. Ask your agent to give you a list of average costs so you don’t get any rude surprises. There may be a good faith deposit that takes the house off the market, various filing fees, inspection fees, insurance payments, etc.
You don’t get pre-qualified or pre-approved by a lender. Many agents tell prospective buyers to get pre-qualified or pre-approved for a mortgage before they go house-hunting. You could be wasting everyone’s time if you don’t qualify for the mortgage amount you want or need.
If you’re pre-qualified, a lender is saying, “Yes, if all your paperwork is accurate, we’ll lend you this dollar amount.” It’s not a sure thing, and sellers like sure things.
Getting pre-approved takes longer. You apply for a mortgage and the lender undertakes a review of all your paperwork. If everything adds up as it should, the lender actually approves you for a loan before you start house shopping. Sellers love pre-approved buyers because they know the buyers can get the cash to buy.
You don’t get the kind of mortgage that best suits your borrowing needs. If you buy a house you plan to sell in five years, a 30-year fixed-rate mortgage may not be ideal. A variable-rate mortgage that readjusts every five years may be a better fit for you. There are many types of mortgages with various terms and rates, so be sure to ask your banker which one would best suit your needs.
You don’t check your credit score. You’re entitled to see what potential lenders see, and to file dispute claims. Visit www.annualcreditreport.com, a site that allows consumers to request a free credit report once a year from the three major credit reporting agencies. There’s no cost or obligation. Then, if you find any errors or disputed charges, get them cleaned up before you apply for a home loan.
You don’t pay down your personal credit before applying for a mortgage. When a lender sees that you’re just scraping by, obtaining a mortgage loan is more difficult, and may cost you more in the form of higher interest rates or mortgage insurance. Make sure you’re up to date on credit cards, personal loans, and other outstanding obligations, and pay down as much as you can before applying for a mortgage.
Finally, you fail to find a lender who understands your mortgage needs. It’s important to find a local lender who can sit down with you, face-to-face, and discuss what you need and want in a home, help you decide on a budget that works for you, and find a mortgage with terms that fit your particular situation.
The professionals at Nevada State Bank handle mortgage applications every day. They have the knowledge and experience to help you find the mortgage* that will work best for you, so you can feel comfortable in your new home. Nevada State Bank wants to be your neighbor – and your mortgage lender of choice.
*Loans subject to credit approval. Terms and conditions apply. See bank for details.
ZB, N.A. NMLS# 467014
The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank, a division of ZB, N.A.
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