As you prepare to buy your first home, you likely face the process with a mixture of fear and excitement, and for good reason. This is a major financial step and one of the largest investments you will make, so you want to make sound financial choices. Before you start the process, make sure you are not falling victim to these common first-time home buyer mistakes.
1. Failing to Figure How Much You Can Afford
Before you even begin looking for a home, make sure you know how much you can afford. Getting a mortgage can be a good starting point, but don’t base your home buying budget on this limit alone. Our Mortgage Department will work with you to help you determine what you can comfortably afford on your monthly budget.
You can also use an amortizing loan calculator to help you determine estimated monthly payments. Be sure to account for property taxes, increased utilities, and increased home maintenance costs that come with owning your first home. Think realistically about your personal spending habits as you make monthly budgeting estimates.
2. Draining Savings to Become a First-Time Home Buyer
Draining your savings to buy your first home is not a good idea. You’ll likely face some surprise expenses as a first-time homeowner that you’ll need to cover. Set money aside to ensure that you’re prepared for any unexpected costs that might arise.
For example, if your dishwasher breaks, as the homeowner, you will be responsible for replacing or repairing it. Also, after you move into your home, you will likely find furnishings and other items that you will need to buy to make it comfortable. Keep a little buffer of savings to help with these types of home ownership expenses.
3. First-Time Home Buyers Can NOT Ignore Credit Reports
Your credit report will be a deciding factor in how much you are allowed to borrow as well as your interest rate, so be sure to check it before starting the mortgage application process. Sometimes credit reports can contain errors, and that can lead to an inflated interest rate that you do not deserve. Check your credit and correct any errors before starting the mortgage application process.
4. Not Getting Pre-Qualified Early
Be sure to ask us about pre-qualification for a mortgage. This process gives you an idea of how much you would be allowed to borrow, and also gives you negotiating power when making an offer on a home. Pre-qualification is not the same as the actual mortgage application, but it is an important first step and valuable negotiating tool for first-time home buyers.
5. Waiving Contingencies
When making an offer on a home, you have the option to add contingencies, such as making the offer conditional to the results of the home inspection. Waiving contingencies may make your offer more desirable to the seller, but doing so puts you at risk.
If you don’t have a home inspection contingency and discover a serious problem with the home at some point after your offer is accepted, such as a termite infestation or serious water damage, you may not have a way out of the contract.
Buying your first home should be an exciting adventure, not a financial pitfall. Take care to avoid these mistakes, and you can move forward confidently as you make your first home purchase. As you join the ranks of first-time home buyers, be sure to make good financial decisions so that you and your family can truly enjoy your new home for years to come.
Peach State’s Mortgage Services Department offers a complete suite of mortgage products to fit your life and a mortgage expert to help you finance your home. Contact us today at 770.580.6098!