When a prospective home buyer is looking to learn more about the process, there are numerous areas to cover. This is especially true of first-time home buyers. They may have all of the right tools at their disposal but that does not mean that they are impervious to the usual pitfalls. Fortunately, these mistakes are more easily avoidable than most may realize.
Thanks to this handy guide, homebuyers can afford houses that are out of their price range and other all too common mistakes. Let’s take a closer look at these types of errors and how they can be avoided entirely. First-time buyers should never be forced into a bad decision because of mere naivete or lack of access to crucial facts.
Lack of Realistic Budgeting
Many first-time buyers will have unrealistic expectations, especially when it comes time to decide on a price range. The best realtors help prospective homeowners to have a more helpful outlook, so that they can avoid wasting their own time (and the time of various sellers). The last thing that a seller needs or wants to deal with is a buyer who is clearly not thinking clearly about their own financial capabilities.
The goal should be a very simple one: obtain a property with a monthly payment that will not cause undue financial stress. That’s why many first-time buyers will aim as low as possible. If there are any further questions about what is truly affordable, the realtor can help the buyer to learn more about the importance of the mortgage affordability calculator.
No Credit Report Check
The more research that the homeowner handles on their own before the big day arrives, the smoother the process will be. No mortgage lender is going to offer a pre-approval without taking a closer look at the credit report. Any prospective buyer that would like to avoid the unwanted surprises will do well to make sure that they are handling this well ahead of time.
A credit report that has errors that have not been fixed can have huge consequences. For example, the buyer could be left with a much higher interest rate than what they were actually entitled to. The lender is not going to be putting in that sort of time and effort on behalf of someone that they have yet to meet.
Lack of Down Payment
Many prospective buyers are under the illusion that they can pay the literal bare minimum when it comes time for a down payment. Sure, there are programs where the buyer may be able to avoid a down payment entirely. In other instances, they could have a chance to start the process with a mere 3% down payment. This is the classic “just because you can doesn’t mean you should” scenario.
A 20 percent down payment may not be feasible but that does not mean that a bare minimum down payment will suffice either. Surveys show that lack of a bigger down payment is often the biggest regret that first-time homeowners have when the process is complete. The bigger the down payment, the more affordable the monthly payments become, allowing the homeowner to pay off the mortgage more quickly. Alternatively, if you install alternative energy equipment you can take advantage of various state and federal tax credits that will bring down your monthly expenses and tax liability, and in turn, you can afford higher monthly payments.
Dumping Out The Entire Savings Account
Conversely, there are prospective homeowners who make the mistake of emptying out their entire savings to make a purchase possible. This is a short-sighted decision that is going to cause far more problems over the long haul. In most instances, a first-time buyer is purchasing a home that is previously owned. These residences are not going to take care of themselves. A homeowner who empties out their whole savings is placing themselves at serious risk of not being able to afford these types of repairs.
When things break, homeowners need to have cash on hand to handle these issues. An emergency fund is needed, so that a homeowner is not forced to take out onerous loans to keep everything in working order. Closing costs and down payment must be considered during the decision-making process. Set aside extra funds and don’t make the mistake of cutting it too close. A new homeowner needs to give themselves plenty of cushions for unexpected expenses.