Common First Time Homebuyer Mistakes (And How To Avoid Them)
Buying a home can be quite an adventure – one that is both exciting and, at times, overwhelming. Though purchasing a house can be a daunting task, understanding the home buying process can make the experience a much more positive one. You’ll feel much more in control of the situation if you thoroughly understand what’s going on and what needs to be done each step of the way.
While it’s helpful to understand what you should do as you’re preparing to buy a home, it’s equally helpful to understand what NOT to do if you want the home purchase process to go smoothly.
Here, we share some common first time homebuyer mistakes and tips for how you can avoid them as you begin the home buying process yourself!
8 Mistakes Many First Time Homebuyers Make During the Mortgage Process
1. Not Getting Prequalified For a Mortgage
Getting prequalified for a mortgage is a great idea if you’re seriously considering purchasing a new home. It can help to move the process along once you find the perfect house, and can also signal to sellers that you are a serious buyer. Many first time homebuyers either don’t know about the option to prequalify for a mortgage or they skip this step altogether.
How To Avoid This Mistake:
Once you’ve decided buying a house is something you’d like to explore and you’re ready to start the process of finding the perfect home, start the prequalification process with one or more mortgage lenders in your area. Start the prequalification process with Maple Tree Funding today!
2. Choosing a Home That Is Too Expensive
Many first time homebuyers don’t fully understand how much they can afford to spend on a home. This is not entirely surprising, as there are a lot of factors involved in determining just how much your home buying budget should be. As a result, it can be very easy to fall in love with a house that is more expensive than your budget can accommodate.
How To Avoid This Mistake:
Work with a mortgage lender to truly understand what you can afford to spend and stick to the budget you are comfortable with! Remember – you’ll be paying more than just the mortgage premium each month, so be sure to take taxes, utilities, mortgage insurance and other costs into account when estimating your monthly payment. You’ll also want to estimate your closing costs so you know how much money you will need to have up front, before you even begin paying your monthly mortgage.
3. Opening a New Line of Credit
Having credit cards, school loans and car loans are helpful when it comes to establishing credit – an important thing to do if you’re hoping to buy a house. While in some cases opening a new line of credit or taking out a loan might help you to improve your credit, doing so during the home buying process can complicate things. Many first time homebuyers don’t realize that if you open up a new credit card or take out any kind of loan while you are in the process of securing a mortgage, you will have to requalify your debt to income ratio. This can slow the home buying process down as banks will have to reevaluate your financials. It may also cause you to become disqualified for some mortgage options you may have qualified for previously.
How To Avoid This Mistake:
Be mindful of your credit throughout the duration of the mortgage and home buying process. Any action that may impact your financial standing or your debt to income ratio can complicate the process of securing a mortgage. If you are planning to take out another loan or open a new line of credit, check with your mortgage lender ahead of time to find out what kind of impact your action might have.
4. Closing Certain Lines of Credit
Just as opening new lines of credit can impact your credit and ability to qualify for a mortgage, closing lines of credit during the homebuying process can have an impact as well. FICO weighs your credit score based on active/healthy trade lines. If you have three trade lines and then decide to close 2 credit cards before getting your credit pulled it can hurt your score dramatically!
How To Avoid This Mistake:
Think carefully before closing any accounts or credit lines while in the process of securing a mortgage. If you’re not sure if the account you want to close will impact your credit, check with your mortgage lender before you take action.
5. Depositing Unsourced Funds
Many first time homebuyers try to scrounge up every cent they have while saving for a house. This often means depositing funds from a variety of sources into one account. While banks do like to see money in your account when you apply for a mortgage, they don’t like to see unsourced deposits.
How To Avoid This Mistake:
If you plan to make any big deposits or transfers around the time you are applying for a mortgage, be sure you can explain where the money came from! Banks don’t like to hear that you just had the money lying around the house.
6. Quitting Their Job
This may seem obvious, but many times people shopping for a home are planning to relocate and start a new job. Quitting your job in the midst of the mortgage process can really complicate things. Just because you are preapproved doesn’t mean you will be able to secure a loan if your income changes drastically.
How To Avoid This Mistake:
Plan to be employed through the duration of the home buying process, and plan accordingly if this is not possible. You’ll want to be sure you have a steady and reliable income before you take on a mortgage that will need to be paid each month, and most lenders will carefully verify that you are capable of making the monthly payments before agreeing to grant you a loan.
7. Not Looking at Enough Houses
The process of shopping for a home can feel like it takes forever. Once they’ve decided they are ready to buy instead of rent, many first time homebuyers are anxious to find a house and move into it, causing them to rush into a decision on which home to purchase. This can result in buyer’s remorse.
How To Avoid This Mistake:
Take your time shopping for a home. Look at lots of homes, even ones you’re not sure you are interested in, as long as they are in your price range. If you have a timeline in mind for when you would like to be living in your new home, be okay with that timeline shifting flexibly. It’s so important to find a home that you feel is right for you, in terms of features, location and pricing.
8. Rushing the Home Purchase Process
Once you’ve found the perfect house, it can be hard to wait as the purchase process runs its course. Some first time homebuyers try to speed up the process by skipping the home inspection and forgoing other important steps. This can lead to problems and unexpected expenses down the road.
How To Avoid This Mistake:
Be prepared for the home purchase process to take time. Many times, even if the process goes smoothly it can take 4 to 6 weeks from the time an offer is accepted to the date that you close on the house and can officially move in. Try to be patient and don’t be tempted to skip steps in order to speed up the process. You’ll likely regret it later.
Avoid These First Time Homebuyer Mistakes
“What do I have to do in order to get a mortgage?” is an important question to ask – but just as important is the question, “What SHOULDN’T I do if I’m trying to successfully obtain a home loan?” Keep these “not to” tips in mind and you’ll be on track to navigate the mortgage and home buying process successfully!
Want someone to guide you through the dos and don’ts of buying your first home? Contact Maple Tree Funding today! We’ve been helping homebuyers throughout New York make their dreams of homeownership a reality for more than a decade. (Find out why thousands of homebuyers have chosen us!) Give us a call at 518-782-1202 or contact us online today!
Additional First Time Homebuyer Resources:
Looking for more resources to help you through the process of buying your first home? Check out these helpful guides for first time homebuyers:
First Time Homebuyer FAQs – Get the answers to common questions that first time homebuyers have. Have a question that’s not included here? Let us know and we’d be happy to answer it for you!
Home Buying Tips – Now that you know what NOT to do while you are in the process of buying a home, get some tips on how you can find a home you love that suits your budget.
6 Step Guide to the Mortgage Process – Get to know the steps involved in obtaining a home loan so you know what to expect when it comes to securing a mortgage.
Guide to Who’s Involved in Buying a Home – Find out who you’ll be working with throughout the home buying process and what role each individual plays.
Mortgage Blog – Browse articles about all aspects of the home buying process.