It can be nerve-wracking and exciting to shop for your first home. That’s because you’ll have to look for the right place and mortgage provider. Because the demand and prices in the real estate market are high, you might encounter a few difficulties buying your first home that fits your needs. In fact, it’s tempting to settle with something less.
Before making offers and visiting open
ouses, you have to prepare your finances. That can entail getting a clear picture of your overall financial situation, debt-to-income ratio, and credit profile. Doing that will convince the best mortgage lenders that you can pay the money you owe to them.
Most first-time homebuyers make a lot of mistakes throughout the process. Below are some common pitfalls you should avoid if you want to streamline the buying process.
Only Settling Debts Before Applying
It #39;s human nature to forget about an old credit balance that you never settled. Even if your financial resources allow you to pay for your debts, making that a habit to settle them before submitting your application for a loan isn’t advisable. Making significant changes in your credit profile will reflect as a new activity and affect your overall history.
Make it a habit to settle everything before applying for a mortgage loan. You have to balance your finances from six months to a year before applying for your loan. That will minimize the negative marks that will affect your credit profile, minimizing the risks of recent payments causing a massive dip in your score.
Not Thinking About Your Employment
It’s another human nature to always go after better opportunities. But even if you get a better offer at a more prominent company, avoid jumping the gun. You have to wait after getting preapproved for your loan.
That’s because mortgage companies will only be interested in applicants with at least two years of employment to show that you’re capable of qualifying for the loan.
Even if you can get shorter commute times, more income, and other benefits from your new job opportunity, changing your employment before applying for the loan will prevent you from getting the best deals on your mortgage.
Not Shopping Around for Options
It’s only natural that people are afraid to talk to multiple mortgage lenders. If you’re also not familiar with how they calculate your credit scores, remember that different factors will affect your credit history. But the advantages of talking to multiple lenders will still outweigh the disadvantages when applying for a mortgage.
Even it’s pretty complicated, applying for a loan and shopping around for options will help you out down the road. Even the slightest difference between their offers will allow you to save a considerable amount of money on the mortgage.
Not Acting Immediately for a Deal
You shouldn’t rush the decision of buying your first home. But if you find an affordable deal that fits your budget, you must act quickly. Be decisive. Mortgage rates can change after a few months or years. If you could find an affordable deal that fits your needs, you should act on it quickly before the rates change again. Don’t miss that opportunity.
Not Saving Money for Closing a Sale
Downpayments aren’t the only things you have to consider while buying your house. You might have to pay for taxes, association fees, title and homeowner’s insurance, and other charges for closing a sale. You might also have to pay for mortgage insurance upfront if your FHA loan application was approved.
Mortgage loans will help you shoulder some of these expenses, but there will be other fees that you’ll have to settle before you can close a deal.
Opening New Credit Card Accounts
While saving for the closing charges and downpayment, you might decide to buy unnecessary things and charge them on your credit card. But that’s a huge mistake that will result in a higher interest rate or chances of not getting approved for a mortgage loan. You should avoid spending months before buying your first house.
By limiting your usage of your credit card, you can also keep your utilization low.
Not Knowing What Your Needs Are
You shouldn’t only rely on a lender that a friend recommended or pick someone based on how close their offices are to your home. Likewise, don’t pick someone you work with from other banking products. Being loyal to a particular company might hurt your overall budget. Make it a habit to check the reviews of ones who are new to you.
Buying your first home will require planning and preparations before jumping into the process. By being decisive while going through the mortgage process and looking for the property to buy, you’ll increase your chances of qualifying for an affordable. That will help you find a property that your family will be comfortable with.