No one is an expert at something the first time they do it, so it’s only natural that first-time home buyers tend to make mistakes. Here are some of the typical mistakes you could make so you can avoid them.
Not Knowing How Much You Can Afford
Don’t try to estimate this, and don’t assume you should buy as much house as your mortgage approval allows. Calculate your monthly expenses and any additional monthly expenses (like new bills and potential repairs and maintenance you can anticipate after the move) to determine what you can comfortably pay. You can use mortgage affordability calculators for a little extra help.
Get your mortgage approval before you look at homes, even though it’s not fun. You don’t want to waste time or toy with your emotions looking at homes that are too expensive or not as much as you could afford.
Only Exploring One Mortgage Lender
Different lenders offer different rates and different policies. You should shop around for the right one for you. If you’re concerned that multiple rate quotes will negatively impact your credit, know that any mortgage applications you file in 45 days will be counted as only one credit inquiry. Try to get quotes from 5 lenders.
Ignoring Your Credit Report
Use CreditKarma or contact all three major credit bureaus for a credit report to optimize your credit. The most important thing is to make sure there aren’t errors or things that you need to dispute. It’s best to do this at least thirty days before you apply for a loan. If you’re planning well ahead of time for your move, you could consider doing things to boost your credit score.
Mishandling Mortgage Discount Points
Discount points can save you money on your interest rate throughout your mortgage. This may or may not be a good investment. You pay for these discount points upfront. If you’re barely able to afford the move, then taking on the extra burden of the discount points is not advisable. The next point to consider is how long you plan to live in the home. If you’ll be staying past the “break-even period” when the monthly savings from the discount points have made up for the upfront costs, then you’d be making a wise decision to purchase the points. If not, you’ll be spending extra money for nothing.
Spending All Your Savings
You’ll need the cushion of your savings to keep yourself financially sound to afford the mortgage. Unexpected expenses are a fact of life and could put you in a bind if you don’t have some money set aside to cover them. This is particularly true if you’re buying a preowned home because you never know when something will need to be repaired or replaced.
Using Your Credit Too Soon
Once you finalize your loan, it’s easy to think that no one is looking at your credit report anymore and you can start using your credit again. But that’s not true. Lenders frequently check credit reports again before the sale is final, and this check can impact your interest rate and even whether you still have a mortgage. So, don’t apply for credit cards or make purchases using your credit until the sale is final.
Avoid further mistakes and call Wendy Gimpel
A local real estate agent can help you get a picture of the typical costs of owning a home in the area you are thinking of moving to. If you’re looking for a luxury home in the Stillwater, MN area, Wendy Gimpel has the expertise and keen eye to help you find the perfect home for your needs and desires. Contact her to get started.