If you’re thinking about buying a new home soon, you’ve taken the first step to homeownership! Are you excited? You should be! Homeownership is an exciting journey. After all, the home you’ll be in will be YOUR home, not your landlord’s. Before we get carried away in what colors you’re going to paint the walls or stain the floors, let’s not put the cart before the horse. There are lots of common home buying mistakes to avoid. Do not be one of those homebuyers! Here are the most frequent home buying mistakes that our team encounters and want you to avoid.
1. Looking for a house before getting pre-approved for a mortgage
This is the number one home buying mistake, no doubt. We know this isn’t the most exciting part of buying a new home, but it’s one of the most essential. In this phase of the home buying process, you will work with a mortgage banker to see what your financial state is and if you qualify for a mortgage. You and your mortgage banker will look at your credit report, your debt, how much money you’re able to put down on a mortgage, the different types of loans you qualify for, payment options, and more. Once you take the time to make sure you are in good financial shape to buy a house, then you can be off to the races to house hunt with your realtor!
2. Not considering a local lender
If you bank with a large bank, it may be an easy decision to go with that financial institution for your home loan. Before you apply with a big bank, consider the local lender around the corner from your house. Working with a local lender gives you the features of a big bank with the personal service of a small bank. They are rooted in your community rather than in a city hundreds of miles away from where you live. Local lenders are aware of special financing opportunities in your area and may be able to give you more loan options. Consider working with a local lender that serves your community before a big bank.
3. Not investing in a home inspection
Buyers should always invest in an inspection by a licensed home inspector. This part of the home buying process involves a home inspector coming to the property and thoroughly checking the home for any underlying issues or defects. The repair may identify issues severe enough to cause renegotiation between the buyer and seller regarding the sales price, repairs, or the buyers moving on to a different property.
4. Putting too much money down
There are benefits of a large down payment, such as lower interest rate and lower monthly payment. Additionally, this could mean no mortgage insurance. However, there are times when it is better to keep those funds in a savings account where they can be used when needed. That extra cash can be used towards unexpected moving expenses or paying extra towards your mortgage each month. Discuss with your local mortgage banker what kind of down payment is realistic for your situation.
5. Not planning for the costs of owning a home
One of the biggest differences in owning a house or condo is that you are responsible for the upkeep of the property. If an appliance goes out, or water heater leaks, it’s up to you to maintain it. So be sure to keep those often-unexpected costs in mind as you’re shopping for a home and setting your monthly budget.
6. Making a large purchase or applying for a credit card before closing
Your credit gets pulled once during pre-approval and just before closing. Underwriters confirm that your financial situation hasn’t changed before giving the clear-to-close. While you’re in the process of home buying, it’s vital to not make any large purchases or apply for additional credit as both of these has the potential to jeopardize the approval of your loan. When in doubt, contact your mortgage banker if you need to take out additional credit or make a large purchase.
7. Not considering special loan programs
Many home buyers often think the only way to get a mortgage is to pay 20% down, which is not the case. There are many programs that help people become homeowners for little or no money down. From government programs like FHA, VA, and USDA, to programs developed specifically for first-time home buyers. There is a mortgage program to help almost anyone become a home owner.
Hopefully, this list of home buying mistakes helps you in your next home purchase. The journey to homeownership is an exciting one if you take the right steps and avoid the wrong ones. Find your trusted advisors in your friends or family, and partner with a local realtor and mortgage banker to guide you through the process.
Article originally published by BankSouth Mortgage