Buying a home is a huge deal, especially if you’re a first time home buyer. There are so many important things to consider other than just finding your dream home. You want the perfect location, a great price, low-interest rates on your mortgage and a home you can move into as soon as possible. However, to be successful in all these areas requires time, patience, research and knowledge of the home Buying process. Armed with the right information, first time home buyers can avoid some of the most common first time home buying mistakes. After reading this, hopefully, you can avoid making these nine first time home buyer mistakes.
Incorrectly managing your credit
Many first time home buyers try to get their credit “in order” by paying off all their credit cards prior to applying for a mortgage. While being debt-free may sound great, this can be a mistake. Lenders look not only at credit scores but also at how you manage your credit. They typically like to see regular transactions for the previous 1-2 years. They can’t see that you’re paying your bills on time if everything is paid off. For instance, using your credit cards regularly and making the payments on time shows the bank an excellent credit history. A good idea is to perform a credit check before you begin home shopping. You may find errors on your credit report, a paid bill still listed as unpaid or even financial information that doesn’t belong to you. While it’s possible to have credit report errors corrected, it won’t happen overnight. The credit bureau isn’t going to just take your word for it that there are errors. Nor are they going to verify that they are errors. It will be your responsibility to contact the business who sent in the incorrect information or who failed to send in info that a bill is paid, etc. This can all take up to a few months to get corrected. You don’t want to learn about these errors when you’re sitting in your lender’s office. Know ahead of time what your credit report says so there are no surprises. If you know ahead of time, you can have the errors fixed.
Not knowing what you can afford
First time home buyers are often anxious to buy a home they can call their own as opposed to paying rent to others. They typically have the feeling that if they paid $800 per month for rent, that’s what they can afford to pay on a mortgage. When you find a house you like, find out what the final price will be, including closing costs, interest rates, etc. Know how much money you’ll be borrowing. Know the top and bottom dollar of what you can afford to pay. The best way you can do this is by making a budget of all your expenses – not just monthly payments – but additional expenses as well. While you may not pay for dental care, vision care or car maintenance on a monthly basis, these are expenses that do come up from time to time. Figure these estimates into your budget.
Getting emotionally involved in a house
Whether it’s your family homestead or your dream house down the road, don’t allow your emotions to get in the way of your good judgment. This could result in making a bid higher than the home’s value or buying a home with potential problems that could be costly to repair. The phrase “love is blind’ comes to mind when you think of buying a home that you love. You may not see problems exist or may tend to ignore them in your quest to own this home. Also, don’t allow your love of the house to show to the seller because they’ll be less likely to come down in price if they think you’ll pay their asking price no questions asked.
Not ensuring you’re pre-approved for your loan
Few things are more disappointing than finding the house of your dreams and even making a bid only to discover you’re not eligible for financing. If you don’t have a lender or mortgage broker, find one and get the process rolling so you know not only that you’re approved but also for how much. Even if you have a local lender who tells you getting a mortgage will be no problem, visit him or her in person and start the process so you have actual figures you can work with when looking at homes. Why waste time on homes you can’t afford to buy? If you do find a home you really want, it can make a difference to the seller if they know that you’re already pre-approved and they won’t have to wait a long time be paid.
Failure to figure additional costs of home ownership
First time home buyers tend to compare what they paid for rent to what they’ll pay on a mortgage. They may also fail to realize that the initial price tag on a house is not the bottom dollar of what they’ll have to pay. First, they don’t always take into consideration that as renters they only paid rent, whereas home ownership involves real estate taxes, home insurance, and maintenance. Second, they don’t always anticipate closing costs when figuring what they’re going to need to borrow. Closing costs can run from 2-5% of the purchase price. If you’re borrowing $200,000, you can expect closing costs to be anywhere from $4,000 to $10,000 give or take. These fees are often referred to as “hidden fees”, but they become very visible when you’re ready to sign on the dotted line and claim ownership. Know what it will cost not only to buy your home but to maintain it and pay other necessary fees. If you have close friends who are first time home buyers, don’t be afraid to ask them for tips. Ask them about additional costs to buying and maintaining a home.
Not finding a lender you can trust
Believe it or not, all banks and lenders are not the same. They may have similar interest rates, but they’re not the same. Whether you’re dealing with a lender from a financial institution or a mortgage broker, find someone you can trust. They’ll be helping make the largest purchase you’ll probably ever make in your life so you want someone that you can trust to look out for your best interests. If you’re lucky, you may a personal banker that you’ve dealt with for many years and trust completely to help you. If not, do some research on different lenders and banks both online and in your area. Whether you do your research online or by talking to friends who’ve recently purchased homes, just make sure you do your research so you’re finding the best possible lender. The Internet is a great research tool for finding out about businesses. This information also holds true for a buying agent. Unless you know a lot about homes and buying homes in Maple Ridge, you’ll probably benefit from having a trustworthy buying agent working on your behalf. A good buying agent knows what you’re looking for, is aware of the area or neighborhood, is familiar with home buying trends and is experienced with working with sellers. They can help prevent you from making errors that could become costly down the road.
Getting the professional help you need
Finding a home and buying it sounds very easy. You’ve already had car loans. How much different can it be to buy a home? If you’ve had these same thoughts, you’re in for a real surprise! Buying a home can be very complicated, particularly if you don’t know what you’re doing. Whether you’re a first-time home buyer in Maple Ridge or are doing it for the second or third time, this is the largest transaction you’ll make in your lifetime and you want it to be as error-free as possible. Whether you hire a good loan officer, a mortgage broker, real estate agent or an attorney, hire some sort of professional who deals in home buying. If you’re unfamiliar with the person you’re hiring, ask for references. If you have family or friends who have used these professionals, ask for feedback.
Focusing too much on interest rates
When you’re applying for a mortgage and searching for potential lenders, the most important thing is probably going to be low-interest rates. Interest rates are very important, particularly when you’re talking about thousands of dollars and many years of payments. For instance, if you’re borrowing $150,000 with an interest rate of 4%, you’re going to pay a lot more than a mortgage with a 3.5% interest rate. It may not seem like a lot but over a 20-30 year span, it’s thousands of dollars. With interest rates fluctuating and at an all-time low, you’re going to want to choose the one that offers the lowest interest rate. This could be a mistake. There are other things that are almost as important as interest rates when applying for a mortgage loan. Be familiar with the types of mortgages available (fixed rate, variable rate, etc) and know what the lender is offering you. Ask about the amortization period and any payment options they offer.
Not getting a home inspection
In a perfect world, everyone is honest and trustworthy. Unfortunately, this is not always the case, particularly in the home market where sometimes homeowners are so eager to dump their home so they can buy another, they tend to be less than scrupulous. Never buy a home or agree to buy a home without first having a home inspection. It may cost you money, but the money it can save you in possible repairs down the road can be astronomical. If the seller hasn’t already had a home inspection done, suggest it to them and let them know that any offer you’re making is contingent on the results of the home inspection. If the seller has had a home inspection done on the home, make sure it’s done by a reputable and certified home inspection agent. You can find out about information on inspectors through the American Society of Home Inspectors. If they tell you they’ve had an inspection done by a friend or relative who just happens to be a contractor or carpenter, insist that it be done by a true home inspector, or have it done yourself.
Buying real estate in Maple Ridge BC, particularly for the first time, can be a very exciting experience. However, it can also be a stressful time if you’re going into the process uneducated and inexperienced. Hopefully, this article doesn’t intimidate you or make you fearful of the whole home-buying process, but if you require more information you should check out the Cardas Mugridge Maple Ridge real estate Facebook page.
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