Buying a home can be an exciting experience, whether you are a first-time homebuyer or a current homeowner. However, purchasing a home is one of the most significant financial decisions one will make and it is important to take the time to plan. Without planning, you can easily make a mistake, jeopardizing your long-term financial future.
Here are some of the most common homebuying mistakes to avoid when purchasing a home.
#1 Ignoring the Pre-Qualification Process
The pre-qualification process helps those in the homebuying process determine an accurate budget while strengthening your position when negotiating an offer.
Knowing how much you can borrow from a lender helps determine all the loan options available to you and your financial situation.
Real estate agents and sellers will also take pre-qualified homebuyers more seriously.
#2 Higher Monthly Mortgage Payment Than You Can Afford
Purchasing a home that is more than you can afford can put you at a higher risk for foreclosure if a homeowner ever falls on tough financial times. Higher monthly payments will leave less room for other bills and expenses in the monthly budget.
It is essential to plan out monthly household expenses, such as groceries, car payments, student loans, credit card payments, and emergencies, to help determine a comfortable monthly payment.
#3 Failing to Include Additional Expenses of Homeownership
First-time homebuyers often forget to include the additional expense of homeownership when calculating the total cost of purchasing a home.
After several years of renting, you may be unaware of the additional hidden expenses involved in owning property. As a renter, you are not responsible for such things as property taxes, homeowner’s insurance, lawn care, or home maintenance issues, such as a broken water heater or a leaky roof. As a renter, these issues are handled for you by the landlord.
Also, be aware that fees may be added to your monthly payment based on the neighborhood you choose to live in, such as homeowners’ association (HOA) fees. These fees can be costly, depending on the community, and the costs could increase while you are living in the home.
#4 Spending all of Your Savings
Saving for a down payment and closing costs can be time-consuming. However, it is worth the time to save money beyond the minimum of what you need.
Spending all of your savings can cause trouble when other hidden or unexpected fees arise, putting you in a financial bind. However, saving extra money will help homeowners comfortably afford any potential homeowner costs.
#5 Being Careless with Your Credit
Ignoring your credit score can affect homebuyers during the loan approval process and lead to less- favorable loan rates and terms.
Your credit report is pulled during the preapproval process, and lenders will recheck it before you close on a home. Therefore, any changes to your credit score could mean changes to your home loan.
During the homebuying process, it is important to maintain your credit score. Avoid taking out new loans or making large purchases, and do not open new credit cards or close existing accounts. In addition, paying your bills on time and every month is essential to maintaining your credit score.
#6 Not Learning About the Closing Costs
Besides the down payment required for most home loans, there are many expenses involved when processing such a complex transaction as a home purchase.
Different home loans have different requirements, and understanding these differences is crucial. Other types of mortgages can also have different fees associated with them, making it vital for you to understand the pros and cons of each loan product.
Here are some of the typical costs that can affect your loan and your monthly mortgage payment:
- Property taxes.
- Homeowners insurance.
- Title services fee and lender’s title insurance premium.
- Owner’s title insurance premium.
- Credit report fee.
- Notary fee.
- Survey fee.
- Appraisal fee.
- Escrow fee.
- Loan Origination fee.
- Loan application fee.
- Home inspection fee.
- Attorney fee.
Government recordation fee and transfer taxes.
- PMI insurance (FHA loan).
Related: Closing Costs
#7 Skipping the Home Inspection
Homebuyers can be tempted to save money by skipping a home inspection before purchasing a home. However, spending the money for a home inspection could help protect you from potential costs, maintenance, and repairs in the future.
Home inspections provide potential homebuyers with detailed information on the inner workings of a home and potentially allow for negotiation room, if issues are found, with the seller.
Marimark Mortgage is based in Tampa, Florida, and serves the mortgage needs of homebuyers, homeowners, and investors in Florida, Virginia, and Pennsylvania.
We specialize in conventional home mortgages, FHA, VA, and USDA mortgage options, refinance loans, and reverse mortgages. We’ve worked extensively with cash-out refinancing and help clients to lower their monthly mortgage payments.