October 03, 2019
Buying a house can be an incredibly exciting time, but can also be an incredibly scary time. As with any big financial and personal decision, there’s excitement and joy, but maybe also some doubts.
- How much can I afford to buy a house?
- Is this the right next step in my life?
- Am I forgetting anything?
These worries are natural, and here at PenFed, we want to do everything we can to sooth your concerns and avoid many first time home buyer mistakes to help smooth the home buying process. With that in mind, we’ve created a list of the 13 most common home buyer mistakes, and how to prevent them.
- Not budgeting for a home purchase/buying more house than you can afford/draining your savings
One of the most important parts of buying a house is the budget. Creating a budget and sticking to it is crucial when it comes to buying your house. If you don’t figure out how much house you can afford, you can’t create a long-term practical budget, which could possibly leave you in financial trouble.
- Talking to only one lender or not shopping around for the best financing/mortgages
The first mortgage you’re offered might end up giving you the best mortgage, but without shopping around and talking to different lenders, you won’t know which lender offers the best mortgage for you.
- Forgetting about added costs
This is one of the biggest first time home buyer mistakes. Before you sign any papers, remember there will be many added and unexpected costs, such as closing costs, homeowners insurance, repairs, broker’s fees and utilities. If you don’t save for these expenses, you could fall into the red.
- Assuming you NEED a 20% down payment
For a long time, there has been a belief that in order to buy a house, you must put down 20%. Although 20% or more is considered the norm, the National Association of realtors actually shows that the median down payment on a home is 13%. Putting 20% down makes your payments smaller, but is not necessary to buy a house.
- Skipping or hurrying through the home inspection/not doing a zoning check
One of the most important steps, and also the most overlooked, is the home inspection. Before buying a house, it’s important to get it inspected to make sure there are no major problems with the house. Some of these include a close inspection of the foundation and walls, making sure the walls don’t have termites, and checking for other possible expensive problems. Doing a zoning check is important as well, to see what the rules are if you decide to build an addition or make other changes to your house in the future.
- Looking for a home before applying for a mortgage
One of the most important steps in home buying is looking for a mortgage. Your mortgage is the calculation of how much money you can spend on a house. If you look for a house before applying for a mortgage, you could potentially fall in love with a house that you can’t afford once you apply for a mortgage.
- Being careless with your credit
When buying a house, lenders pull your credit reports to make sure things check out. Being careless with your credit, whether that means taking out a new loan, opening a new credit card, or missing a payment, can negatively impact your closing.
- Making decisions based on emotion
Buying a house is a big life moment and emotions are running rampant, so it’s important to stick to your budget and your non-negotiable lifestyle factors. Don’t become emotionally attached to a home that isn’t yours. Instead, stay objective and savvy until after closing.
- Not using an agent
A realtor is your best resource when it comes to buying a house. They aren’t paid by you, realtors are commissioned by the seller, so not using a realtor doesn’t save you any money, and can only rob you of the experience and the advice a good realtor can bring.
- Not looking into first-time home buyer programs/ ignoring VA, USDA and FHA loan programs
Many proven programs exist to help home buyers afford their mortgages. Ignoring these programs is ignoring the chance to make your dream home a reality.
- Fixating on the house and not considering the neighborhood
Finding your dream house is amazing, but a big factor in the home buying process is the neighborhood. If your dream house is in a homeowners association (HOA) neighborhood, and you absolutely do not want to live with an HOA that presents a problem.
- Applying for credit before the sale is final
The period between when you apply for a mortgage and when you close on a house is critical. During this time, the loan officer does checks to ensure your credit score has not fallen. If you apply for credit in any way or miss a payment during this period, it can make your credit score go down, which can cause a delay in your closing or the lender to cancel your mortgage.
- Lying to your loan officer
When talking to your lender, it’s best to be honest. If you don’t have your pay stubs, or tax returns, lying to your lender about it could result in a delay in closing or a cancellation of your mortgage.