Buying a home is probably about the most expensive decision you will make in your life. And that’s just the beginning. If you are one of the majority who pays for his or her house through financing, you will spend a significant portion of your life carrying the responsibility of the debt. You can afford no mistake.
Hence why in deciding to buy a home, you should know what to do and how your little steps can affect the whole home buying affair. This article familiarizes the first time home buyer with the most commonly made errors that should be avoided if one aims to arrive at a successful conclusion to this important life objective.
Not learning the basics
Expect the barrage of jargons. The real estate and especially the mortgage industry is laden with terms that can only be cracked with a little digging. They are not impossible to understand, but you really need to do your homework if you want to know how things work. Terms like appraisal, debt-to-income (DTI) ratio, loan-to-value (LTV) ratio, interest rates, fixed-rate and adjustable rate mortgages, credit score, etc will dominate the paperwork. Understanding the meaning of these words is vital in strategizing your game plan as a home buyer. It will also open doors for opportunities that you may not know exist should you choose to remain unconcerned in the subject. For example, you may be eligible for an FHA mortgage that only warrants a 3.5 percent down payment on your home financing compared to the 20 percent requirement of conventional lenders. Knowledge does not only help you understand the process, it also helps you expand your options.
Not getting help
Talk to someone who knows what to do and how to get to the objective. When it comes to decisions as important as this, it is always wise to opt out of DIY. Enlist the help of professionals. Find an agent who’s got the expertise and the experience to back it up. These people do more than just find you a home; they also engage in these processes on your behalf and help you navigate your way through finding the home that suits your unique personal and financial needs.
Buying more than you know you can afford
When it comes to buying a home, be realistic. Make an honest evaluation of your finances. Are you struggling? Are you carrying other debts? How is your credit score holding up and will taking a huge debt be manageable in your current situation? You can ask help from the bank to determine how much money you can affordfor home payments using your current financial and debt data. Or, you can simply ask yourself how much of your monthly income you are willing to allocate every month for a home loan payment, then use a mortgage calculator to arrive at an estimated cost. From this number, you can set a standard as to the price of the home you should look for in available listings. If the price is too high, be prepared to walk away.
Be as diligent with your mortgage shopping as you did with selecting your home
Finding financing is tricky for not all lenders are created the same. There are certain fluctuations in various mortgage programs that may seem insignificant at first glance but could lead to thousands of savings when looked into. Be as meticulous in shopping for a mortgage as you’ve been diligent in finding an appealing home. Inquire before applying and do a thorough comparison. You can get financing from your local credit unions or from your traditional banks.
Today’s housing market is favorable for first time mortgage buyers – thanks to interest rates that have continued to stay in historic low positions, and to the diversity of financing programs available that cater to the varying income levels of consumers. It’s getting easier and easier to own a home. But whether you succeed or fail at it is still dependent on how smartly and thoroughly you prepared for it. Learn from these mistakes and be guided in making your own decisions towards successful homeownership.