Are you a first-time homebuyer? Let us help you avoid these costly mistakes!
Buying a home for the first time can seem overwhelming, especially with all the information available. Not to worry! Our team at Colorado Lending Team can help you approach this important decision as best as possible. Here are a few tips we encourage you to implement before looking around.
Not asking questions
Don’t skip this process. Even if it’s counterintuitive, it is better to ask as many questions as you can to your lender or real estate agent before making any moves. Your lender should lay out every single step of the process, and they should be available for you whenever you need them. If your lender doesn’t encourage you to ask questions, you should talk to lenders that do.
Requesting a bank loan for the downpayment
Depending on the area, you’ll typically have to pay around 3% of the property’s total price for the downpayment if you’re applying for a mortgage. Of course, there can be some exceptions, such as in VA loans, but unless you’re refinancing a previous mortgage, using your 401K loan, or taking equity out of a home you already own, you must save up the amount needed. Talk to your loan originator to see what down payment options they allow.
Not investigating downpayment assistance (DPA)
Did you know several instances could potentially help you with your downpayment? Some can be local and some can be government programs, but you must do your research and take advantage of those opportunities. Remember, there is no ‘free lunch’. Most DPA programs are slightly more expensive than regular loans to be able to fund the programs.
Having a low credit score
You should review your credit score consistently and make sure you make your payments on time. If you’re planning on getting a mortgage, you should also consider avoiding big purchases, even if the interest rates are zero. Also, if you find any mistakes in your credit score, you should address them immediately to avoid being held back during your homebuying process. Read more here. A low credit score doesn’t prevent you from getting a loan, so don’t assume your score disqualifies you without talking to a lender
Shopping before pre-approval
We can’t stress this enough; you need to get pre-approved before you start shopping around! A pre-approval letter shows the seller you’re serious about buying, and it gives you a competitive advantage in an already saturated market. Reach out to your trusted lender so they can review all your documents and set you up for success in your home search.
Ignoring closing costs and other hidden figures
This is another common pitfall we see often. You need to keep in mind the closing costs that come with your purchase, which usually include property taxes, additional fees, and title insurance, amongst others depending on the type of property and loan. At Colorado Lending Team we make sure everything’s clear before closing, that way you won’t get any surprises. Be wary of lenders who don’t put numbers in writing or those whose quotes are too good to be true.
Ignoring monthly payments and fees
Owning a home can be rewarding; however, you should consider how much you can pay monthly. Experts say you shouldn’t spend more than a third of your income; that way you won’t be overwhelmed by the expenses during the duration of your mortgage. Do the math and make sure you can cover all of your expenses and still live as comfortably as possible. Check out our mortgage calculator! If you are comfortable with a higher payment, lenders can go higher, just be careful with your budget.
Not considering interest rates
Keeping an eye on fluctuations in interest rates can make a huge difference to your budget. Even if your monthly budget is low, considering even the smallest change in your interest rate can impact hugely on your overall home price. Your trusted lender will be able to give you the best advice possible before you make a move. That being said, rates are only a portion of the expense of a home. The sales price, the down payment, taxes, insurance, and HOA dues are just as, if not more important than the interest rate.
Dismissing your pre-approval
Even if you don’t get the home of your dreams right away, your pre-approval is good for as long as your situation is relatively the same. So, don’t get discouraged, and keep looking!
Having your mortgage payments consume your finances
If you qualify for a high-priced home, that’s great! But are you sure you’re willing to sacrifice comfort? Remember, a mortgage can be a long-term commitment, so even if you qualify for a big loan, take into account your other expenses or debt before leaping into monthly payments that won’t allow you to even eat out or go to the movies.
Not researching your agent and your lender
Always… ALWAYS do your homework and research your lender and your agent. Make sure you check regularly on their Better Business Bureau or Google reviews, or even better, ask friends and family for referrals. A good lender will make sure to give you all the information, make sure your documents are in order, and they will usually be responsive to any questions you might have. Also, your agent must have a great reputation, be responsive as well, and show you only the best properties according to your requirements. At Colorado Lending Team we always make sure to partner you up with the best agent if you don’t have one.
Not looking at different types of homes, including new construction
Commonly, buyers will purchase already existing homes. However, new constructions can have their benefits, such as lower pricing and the opportunity to get a brand-new home. Make sure to do your research on the building companies, check their reputation and reviews, and their after-sale customer service, in case you encounter any issues.
Ignoring potential hidden costs
Imagine this scenario. You finally get your dream home. It’s perfect, beautiful and affordable! Then, you end up realizing there are hidden costs that weren’t disclosed upfront, such as closing costs, insurance, etc. Suddenly, it’s not as affordable anymore. Make sure your lender gives you all the information beforehand and analyze how these numbers will impact your buying decision.
Waiving home inspections
This is one of the most crucial steps that should NOT be skipped. It’s important to make sure everything in your future home is in good condition, and anything that needs to be fixed should be factored into your budget. Some buyers skip this step as they’re in an urgency to buy, and this is a costly mistake. Your real estate agent should help you get this done as soon as possible before closing.
Purchasing your first home is a major milestone, and avoiding these common mistakes can help ensure that your experience is as smooth and successful as possible. By asking the right questions, understanding all the costs involved, and working with a trusted lender and real estate agent, you’ll be well on your way to making an informed, confident decision. At Colorado Lending Team, we’re here to guide you every step of the way, helping you avoid pitfalls and get the best deal possible. Ready to take the next step in your homebuying journey? Reach out to us today and let’s make your dream home a reality!
