Home Buying Mistakes to Avoid
Buying a home is a big milestone, and with that can come a lot of stress about making sure you’re doing everything right throughout the home buying process. Even though homeownership is considered a great investment and comes with many benefits, there is still room to make mistakes. It’s important to be prepared so you can ease your mind and avoid mistakes as you go through the journey to homeownership.
Having Too Much Debt
Going into the home buying process with too much debt can hurt your credit, which in turn can make it more difficult to qualify for a loan and get a good interest rate. Lenders look at your debt-to-income ratio when evaluating you for a loan, and if it’s too high, you may have trouble being approved for a mortgage. Work to pay down your debts as much as possible before starting the home buying process. Reducing your debt will help you improve your credit score, thus helping you qualify for a better interest rate.
Jumping In Without Planning
Never buy a house on a whim. Sure, it may seem tempting to hop on the home buying bandwagon when interest rates are at an all-time low or you happen to stumble across the perfect house, but it’s not a wise choice in practice. Buying a home requires a lot of planning. In many cases, people spend years working to build up their credit and saving up enough for a sizeable down payment. Better credit means better interest rates, and a bigger down payment means a smaller loan. Rushing into buying a home can cost you big time. Planning pays off!
Shopping Before You Are Pre-Qualified
Don’t start looking at homes in person until you’ve been pre-qualified for a mortgage loan. Even if you’ve been planning for months, this is still a crucial step in the home buying process that you don’t want to skip. Getting pre-qualified means that a mortgage lender has already reviewed your finances and determined how much you are eligible to be approved for a mortgage loan. Knowing the amount you can afford for a mortgage loan helps you set your price limits when looking at homes and gives you a realistic expectation of what your closing costs and monthly mortgage payments will be so you can factor those into your budget. Getting pre-qualified also makes real estate agents and sellers take you seriously as a buyer, since you’ve already taken the first step toward securing financing.
Not Knowing Your Options
All mortgage loans are not created equal. It’s important to look at the different types of mortgage loans before you start applying, so you can determine which type of loan is right for you. At Robins Financial, we offer a variety of mortgage loan options including conventional loans as well as government-funded programs like VA loans, FHA loans, USDA loans, and more. We also offer a loan designed especially for first time homebuyers. We’ll help you select which loan type is the best fit for you.
Getting Stuck with More than You Can Afford
Buying a home is a huge milestone that you should be proud of. You don’t want to put all of your money toward buying the home then wind up struggling with your finances each month. Before you start the process, you need to sit down and do the math so you can have realistic expectations of what you can and can’t afford. Our Home Buying Calculators can help you see how your income and expenses stack up so you can determine your budget. And bear in mind that even if you get pre-qualified for up to a certain amount, that doesn’t mean that you need to center your costs around the maximum limit, as this can stretch your finances farther and may put you in a financial bind. Leave yourself some wiggle room so you know you will be able to cover expenses with a slight margin for error or unexpected costs.
Forgetting to Factor In Other Costs
The purchase price of the home you choose is by far the largest expense of the home buying process, but it’s not the only one you need to focus on. It’s important to not get so caught up with the purchase price and down payment that you forget to consider other costs, especially ones that need to be paid upfront. Don’t forget to factor in things like closing costs including attorney fees, fees for relocating utility services or creating new accounts, moving services and/or moving supplies, and any priority improvement or renovations your home needs. Remember that your monthly mortgage payment is not the only cost associated with home ownership. Be prepared for additional costs like property taxes, homeowner’s insurance, and HOA fees when applicable. Maintenance costs are another expense to factor into your budget, including things like lawn upkeep, landscaping, pest control, and pool care. It’s also important to be prepared when there are problems with the house. If your A/C goes out or a major appliance breaks down, you’re responsible for footing the bill for repair or replacement. All of these costs are far less than the total cost of the house itself, but you still need to work them into your total budget so you aren’t caught off guard by unplanned expenses.
Emptying Out Your Savings
A sizeable down payment will help you pay off your mortgage loan faster and cut down on your interest payments, but it’s not worth it to fully deplete your savings to do so. Life can throw you a curveball any time, and it’s important to be prepared when the unexpected happens. Make sure you don’t deplete your savings so you can still have funds to cover those curveballs like medical costs and car or home repairs. If something were to happen right after purchasing the home, you still want to have some savings to fall back on to cushion the blow.
If you’re ready to apply for a mortgage loan, let our team help you get the loan you need. Visit our Mortgage Loan Center to learn more about the mortgage process, use our Home Buying Calculators to get a picture of what your home loan will look like, and check out our Buying a Home video series on YouTube for more information about home buying. Apply for a mortgage loan online or set up an appointment to speak with one of our Mortgage Loan Officers.
At Robins Financial Credit Union, our mission is to enhance the financial well-being of our members and community. We honor this commitment by providing educational content to help you make the most of your finances. Read our other blog articles to help you gain the financial knowledge you need to succeed.