Whether you're a first-time home buyer in Emerald Isle, NC or someone who has bought a house in the past but needs a refresher, today we're discussing what not to do when buying a home. These rookie mistakes will cost you time, money and unnecessary stress so be sure to read up on these rookie home-buying mistakes and be sure not to make them when it comes time to purchase your home here in Emerald Isle, NC or anywhere on the Crystal Coast.
Mistake #1: Equating affording a mortgage as being the same as affording a home.
Home buyers often commit to home ownership once they qualify for a mortgage and are comfortable making the monthly payment. But that's only one slice of the home ownership pie.
Property insurance, taxes, homeowners association dues, maintenance, and electric and water bills are some of the costs that first-time home buyers tend to overlook when shopping for a place to call home. Some of these costs have a tendency to go up every year, particularly property taxes and insurance, so be sure you can afford the potential increases later. And then there are home improvement costs, maintenance expenses, and other surprises that can crop up along the way.
✔ How to Avoid This Mistake: Start by totaling up all of the monthly costs associated with a home purchase, including your projected mortgage payment, tax and insurance estimates, HOA fees and home maintenance costs. And don't worry if you don't have concrete numbers—the point is to see if you can afford a ballpark amount.
Mistake #2: Shopping for a home before shopping for a mortgage.
As a general rule of thumb, potential home buyers could shop for homes not more than 2-3 times their annual income. But before you begin shopping for homes, you should be getting pre-qualified and pre-approved for a mortgage. What's the point of looking at houses that are not within your affordability range? This may not be as fun as heading out and looking at your dream homes, but it does help you stay focused on making a smart financial decision instead of an emotional one.
✔ How to Avoid This Mistake: Talk to a mortgage professional about getting pre-qualified or even pre-approved for a home loan before you start to seriously shop for a place. The pre-qualification or pre-approval 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.
Mistake #3: Spending your life's savings on a downpayment.
If you buy a previously owned home, unexpected repairs start cropping up pretty quickly. If your budget is too tight or you've used up all of your savings just to purchase and make payments on the home, you could quickly find yourself in a hole financially. You don't want that, obviously.
✔ How to Avoid This Mistake: Home buyers who put 20 percent or more down don’t have to pay for mortgage insurance when getting a conventional mortgage. That’s usually translated into substantial savings on the monthly mortgage payment. But it’s not worth the risk of living on the financial edge. Consider paying for mortgage insurance any day over not having money for rainy days. Everyone—especially homeowners—needs to have a rainy-day fund.
Mistake #4: Not looking into first-time home buyer assistance & other loan assistance.
As a first-time home buyer, don’t make the error of assuming that you have to delay home ownership 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.
✔ 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%.
Mistake #5: Not checking your credit report for accuracy.
Mortgage lenders 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.
✔ How to Avoid This Mistake: You may request a free credit report each year from each of the three main credit bureaus. You should also dispute any errors you find and make sure they are corrected.
Mistake #6: Applying for new credit, loans, or changing your debt-to-income ratio before the home sale is final.
You pre-qualified for a loan. You found the house you wanted. You signed the contract and the closing is in 30 days. Don’t celebrate by financing another big purchase. Lenders pull credit reports before the closing to make sure the borrower’s financial situation has not changed since the loan was approved. Any new loans on your credit report can jeopardize the closing. Buyers often learn this lesson the hard way.
✔ 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.
Mistake #7: Going it alone instead of enlisting the help of THIS real estate professional.
New to the home-buying game? You’ll need a reputable real estate agent, a good loan officer or broker, and a lawyer. Venturing into this process alone, without professional help, is not a good idea.
✔ How to Avoid This Mistake: #1. Do NOT contact the listing agent. Why? The listing agent cannot legally provide you with the representation that a buyer's agent will provide you. #2. Let ME help! I have the resources you need and the knowledge and experience to help guide you every step of the way when purchasing a home in Emerald Isle, NC or anywhere on the Crystal Coast. Contact me by calling or texting 919-308-2292 or send an email to: DRaczkowski@fathomrealty.com.
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