Buying a house is one the biggest decisions people make in their lives. It is easy for first-time home buyers to get caught up in the home buying process and make mistakes that may have a big impact on their future.
Here are the 5 most common mistakes to avoid while shopping for your first home:
1. Only working with one lender
Shop around with multiple lenders and do not go with the first lender you speak to. Get information from at least three lenders. Comparing multiple lenders can help you get a better frame of reference. When shopping for lenders, look at rates, lender fees and loan terms.
2. Not getting pre-approved with a lender
Getting pre-approved gives perspective home buyers an idea of what a lender is willing to finance. In the pre-approval process, the lender confirms the information and documents provided by the applicant to determine how much the applicant can borrow. Even if you are pre-approved for a loan, it can still fall through if there is a significant change in your credit scores, you accumulate more debt or make any financial changes that can affect you ability to repay a home loan.
3. Buying a house you can not afford
Before you open up Zillow and start searching for homes, review your finances and figure out how much you can afford to pay each month for a mortgage payment taking into account any existing monthly bills. According to Forbes, your monthly mortgage payments should not be much more than 28 percent of your monthly gross income.
4. Using all your savings
Spending your savings while buying a home is perhaps the worst mistake new homeowners can make. Realtor.com suggests new homeowners should have and maintain an emergency fund with three to six months of living expenses.
5. Underestimating the costs of ownership
Homeowners have additional costs that renters do not have to worry about. You’ll have additional expenses on top of your monthly mortgage payment. Homeowners also have to pay property taxes, purchase a homeowners insurance policy to protect the home from damages and make any repairs that may be needed. Condo owners also have to pay property taxes, homeowners insurance and homeowners association fees.