3 First Time Home Buyer Mistakes to Avoid

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Buying a home is no small commitment and things like over-enthusiasm and lack of knowledge can contribute to first-time buyer mistakes. If you are in the market for your first home, it is something that requires careful research and consideration. Here are some common mistakes to watch out for.

Taking On Too Big a Mortgage

When lenders are reviewing your application for a loan, they are looking at income and how much debt you are carrying relative to that income. With this information, they come up with an amount that they think you can afford to spend. In all your enthusiasm to get the best house possible, you keep this maximum number in mind. But, what you may not fully compute is that the lender is not factoring in your other expenses; if you do not take the time to do some thorough calculations on what you can truly afford, you will probably be very miserable each month as you are paying your mortgage and other bills. Do not forget to factor in food, vacations and other things you regularly spend money on. You also want to remember that as a homeowner, you are footing the bill for any repairs, not a landlord.

For at least a couple of months, track your expenses; you need to have a clear picture of how much money you are spending, where you may be able to cut and what you cannot live without. If you value your vacations more than anything in the world, but the only way to afford the mortgage payment for your desired house is to never take a vacation again, you probably will not be very happy doing that.

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Not Get Pre-Qualified Early Enough

Getting pre-qualified for a loan is an important first step in the road to home ownership; pre-qualification lets you know how much money you are likely to get for a mortgage. To make the home-buying process go as smoothly as possible and on your desired time frame, you should do this well before you begin house hunting, not right before. If you have any errors on your credit report, it can take awhile for the corrections to be reflected in your score. By finding out your credit score as early as possible, you will have some time to possibly raise it and qualify for better interest rates. You may find that you do not qualify for as much money as you thought, and you may need time to save up a bigger down payment, depending on how you finance your home. The earlier you get a clearer picture of your finances, the better off you will be in your house hunt.

Choosing the Wrong Type of Loan

There are lots of different types of mortgages; the most common one that probably comes to mind is the 30-year fixed rate; there are lots of horror stories about other types of mortgages and this seems like the safest bet. Depending on your situation, it actually may be, or another mortgage is better suited for your goals. If you do not like the idea of paying a mortgage well into retirement, or you want to build equity sooner than later, a 15-year loan may be the better option. In some instances, an adjustable rate mortgage may be your best bet. It is important to thoroughly go over your options with your lender to choose the best loan.