16/06/2021
First-time homebuyers can easily make mistakes out of ignorance or misinformation. Here are eight mistakes they should learn to avoid.
1. Not checking their credit report. People don’t realize their credit score is one of the most important factors in getting approved for a mortgage—and determining the rate they’ll pay. First-time buyers should first check their credit report. Federal law lets consumers get a FREE copy of their credit report every 12 months from each of the three credit bureaus. Buyers just need to visit AnnualCreditReport.com and follow the simple instructions. If they stagger requests to each credit bureau, they’ll get a free report every four months.
2. Not determining a budget. One way to set a budget is for buyers to calculate their entire expenses-to-income ratio—all monthly expenses divided by their gross monthly income—to figure out what they can afford.
3. Not figuring all homeownership costs into their budget. First-timers may not realize that in addition to principal and interest mortgage payments, there are also real estate taxes, homeowner’s insurance, and possibly homeowner association fees, that can be part of their monthly payment. Utility bills may also be higher than they had as renters, and they should budget for ongoing maintenance and repairs too.
4. Neglecting to get a mortgage pre-approval letter. This gives buyers a clear idea of how much they can borrow. As you know, many sellers are requiring a pre-approval letter to accompany an offer.
5. Failing to investigate payment loan options. Buyers do not always need a large down payment. There are many different down payment options based on the loan program they choose. We’re happy to review their individual circumstances and help your first-time buyers find the right down payment option for them.
6. Applying for a loan or credit card after pre-approval. First-timers are usually unaware their mortgage approval is based on their debt-to-income ratio. Borrowing money after they’ve been approved raises this ratio. Applying for a loan or a credit card could also lower their credit score. Doing either of these things before closing risks not getting the mortgage, they were pre-approved for, or making the approved loan more expensive.
7.
Leaving no funds in reserve. First-time buyers can deplete a lot of their cash resources. They should note that in addition to the down payment and closing costs, there are moving expenses, as well as possible furniture purchases and other ownership costs. Buyers need to have enough extra cash set aside to cover emergency repairs and other unexpected home expenses.
8.
Making emotional decisions. Since a home is an investment, first-timers need to make sure the property they buy is a good, practical long-term value, as well as a wonderful place to live.777
