The home buying process can be confusing, even for people who have done it before. Here are some of the most common first-time homebuyer mistakes and tips on how to avoid them so you can make a smooth transition to homeownership.
First-time homebuyer mistakes (and how to avoid them)
1. Skipping pre-approval
Getting pre-approved for a mortgage is a crucial first step in the homebuying process. It gives you a concrete idea of how much you can borrow, which can help you set a realistic budget for your home search, and lets sellers know that you are a serious, qualified buyer. OVM makes it easy – you can start your loan application here!
2. Making financial decisions without consulting your loan officer
Once you’ve begun the mortgage process, it’s important to know that the financial decisions you make can affect your entire application. If you do anything that changes your financial situation, like getting a new job, applying for a credit card, or cosigning on a new account, you may not qualify for the same loan terms or be able to get a mortgage at all. Be sure to talk to your OVM Loan Officer before you make any new financial moves.
3. Falling in love with a house you can’t afford
Because of all the hidden costs of owning a home, like routine maintenance, insurance, and repairs, it’s a good idea to spend less than you’re approved for. It can be tempting to tour homes at the top of your price range, though, especially if you’re disappointed by the design and curb appeal of homes within your budget.
But touring beautiful homes you can’t really afford will only lead to disappointment and make it harder to settle on a home in your price range, so try to avoid it. You can always paint or replace flooring down the road once you settle in.
4. Forgetting to budget for closing costs and other expenses
One of the worst home buying mistakes you can make is forgetting to account for closing costs in your budget. On average, buyers can expect to pay between 2% and 5% of a home’s purchase price on closing costs. It’s a good idea to talk to your loan officer to determine what you can expect as far as closing costs, homeowner’s insurance, etc. so that you are well prepared.
5. Not checking your credit report
Your credit score is an important part of how your interest rate is determined. If you have a good or excellent credit score, you’ll typically get a lower interest rate.
If your credit report has errors that are bringing your score down, you won’t get the interest rate you deserve and will pay more over the life of the loan.
Credit reporting errors happen more frequently than you’d think, so be sure to request your credit report from all three of the major credit bureaus — Experian, Equifax, and TransUnion — and read them carefully.
Additionally, OVM can give you tips on how to boost your credit if needed.
6. Not taking advantage of first-time homebuyer programs
There are plenty of great options to get you into your first (or next) home, even if you don’t have a ton of money set aside for a 20% down payment.
USDA loans help buyers in rural and suburban areas purchase homes with 0% down. They do have income restrictions, though, so you will want to talk this over with your loan officer to see if you qualify. FHA loans require a slightly higher down payment of 3.5%, but there are no income restrictions and they’re very easy to qualify for. Lots of cities and states offer down-payment assistance and grants to help with closing costs.
Some nonprofit organizations like the National Homebuyers Fund (NHF) also offer grants for first-time homebuyers. The NHF down payment assistance program provides up to 5% of the loan amount, which, combined with an FHA loan, could be enough to get you into your first home.
7. Underestimating renovation and repair costs
First-time homebuyers often don’t budget enough money for home repairs and renovations. This may be because they’re used to seeing effortless renovations on TV and having a landlord who takes care of routine maintenance for them.
If the air conditioner breaks or your washing machine conks out, it’s always smart to have a cushion. That’s why it’s important to understand the potential costs and have an emergency fund that’s separate from your down payment. Another good thing to consider would be signing on for a home warranty.
Other tips for buying your first home
Now that you know which mistakes to avoid, here are some extra tips to ensure that it goes smoothly.
- Think long-term.
Make sure that you see yourself living in the home you’re planning to buy for at least five years. Selling a home too early can actually cost you money.
- Consider the neighborhood, not just the home.
It’s easy to walk into a beautiful home and forget about the noisy, busy road outside or the long commute to work, but it can take a toll over time. Make sure to consider the neighborhood, as well.
- Rely on the expertise of your real estate agent and loan officer.
If you have any questions, just ask. They’re available to help guide you through the home buying process and ensure that you’re not making any major homebuying mistakes.
Follow these tips, and your home purchase should go off without a hitch.
Avoid the top first-time homebuyer mistakes with OVM
Working closely with your real estate agent and loan officer can help you avoid a headache.
As always, OVM is here to answer any questions you have and help guide you through the process. Give us a call or start your application today.