Buying a home may be stressful, whether it is your first home or a subsequent one. One way to make the home-buying process easier that may cause less anxiety is by being aware of common home-buying mistakes and how to avoid them. Here are just a few missteps you want to avoid next time you engage in the home-buying process.
1. Choosing a Home Outside Your Means
One of the most common mistakes homebuyers fall into is choosing a home that costs more than they are able to afford. While a bank might qualify you for the highest amount they could lend you, it is just a basic calculation of affordability. You need to take a close look at your budget and determine how much you are able to afford each month without putting unmanageable strain on your budget. Be sure to consider the cost of the mortgage, insurance, taxes, utilities, and upkeep when determining how much each month you are able to afford comfortably.1
2. Not Considering All the Closing Costs
While most homeowners plan and save for their home's down payment, they may fail to consider closing costs and additional fees related to the initial home purchase.
Part of your closing costs may include the following:
- A down payment
- Loan origination fees
- Title insurance
- A year's worth of homeowner's insurance premiums
- Six months of property taxes
- Escrow fees
- Private mortgage insurance
Other costs to consider are moving expenses and deposits for utilities.2
3. Skimping on Home Inspection
A home inspection is a part of the closing process that may help avoid problems in the future. You should have the home inspected even if you buy a newer home. Inspectors look for things that buyers may overlook. Some of these issues might indicate a significant and costly problem in the future. If the house needs repairs or has anything that is not up to code, then you may want to negotiate with the seller to cover the cost of repairs or make the repairs before the closing process.2
4. Failing to Properly Prepare for the Mortgage Process
The mortgage process involves an examination of your credit score, payment history, income and debt. Problems in any of these areas may lead to a mortgage application denial, or you may pay more money down or have to pay a higher interest rate. To manage these problems, you may want to spend time before applying for your mortgage to get your financial health in order.
Start by checking your credit report to ensure there are no surprises or mistakes. If you have any collections that are not valid, be sure to dispute them. If you have the means, you may want to pay down some of your debt to improve your debt-to-income ratio, which may improve your odds of getting a better interest rate.1
You should also prepare your paperwork and have it ready for when they request it. Have at least a month's worth of pay stubs, previous W2s, and three years of prior tax returns.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by WriterAccess.
LPL Tracking # 1-05345916.
1 Top 16 First-Time Home Buyer Mistakes That Everyone Makes
2 8 Common Mistakes First-Time Home Buyers Make