Mortgage Mistakes - How to Avoid Getting in Over Your Head When Buying Your First Home
May 8, 2019 | Posted by: Ted Rhind
If you are tired of renting and ready to buy the home of your dreams, you need to plan carefully. The dream of home ownership is a wonderful thing, but without careful planning and a proactive approach, buying your first home could quickly turn into a nightmare.
If you want to make the most of your first home ownership experience, you need to avoid the mistakes other first-time buyers have made. Here are some key things to consider when shopping for your first home.
Shop at the Low End of Your Range
Just because the lender says you can buy a $500,000 home does not mean you should. If you shop at the high end of your range, you could end up stretched, with little wiggle room should something go wrong.
By shopping at the low end of your home price range, you free up extra cash for things like remodeling and new furniture. Instead of feeling stretched when the mortgage payment is due, you can rest easy in your wonderful new home.
Know Where You Stand - Know Your Credit Score
One of the biggest mistakes first-time home buyers make is not knowing their credit scores. If you do not know your actual credit score, you are going in blind - without the knowledge you need to make an informed decision.
Your credit score will play a big role in the interest rate you are asked pay, or even whether you qualify for a mortgage at all. So before you go shopping, make sure your credit score is as high as it can be. If you need to boost your score, take the time to improve it before you call the agent and start shopping.
Save for a Down Payment
Not saving for a down payment, or not having a large enough down payment, is another common blunder first-time homeowners make. Even if you qualify for a lower down payment, it pays to put down as much as you possibly can.
A higher down payment also means a lower mortgage and a lower payment for the entire life of the loan.
Understand the Extra Costs
Last but not least, many first-time home buyers fail to fully appreciate the extra costs of home ownership. Long-time renters may be surprised at how much it can cost to own a home, and that can leave them financially stretched and unable to make ends meet.
You already know you will have a hefty mortgage payment, but what about things like remodeling and repairs, or the cost of buying new furniture? It is important to take all these costs into account when setting your price range and shopping for a mortgage - it is better to spend too little than too much.
If you are in the market for your first home, you probably have a lot of questions, and you certainly have a lot of things to consider. In the end, knowing what not to do can be as important as knowing what to do, and that starts with avoiding the blunders other first-time buyers have made.