When planning to buy a property, it’s vital to learn what to do and what not to do. However, newbies are bound to make mistakes as they move along. Read on to discover the top five first-time homebuyer mistakes (and tips on how to avoid them)!
Mistake #1: Not Securing Mortgage Pre-approval
When considering the purchase of a new house, it is advisable to seek mortgage pre-approval. Once you’ve found the perfect home, it can speed up the process and indicate your seriousness to sellers. Many first-time buyers are either unaware of or disdainful of the mortgage prequalification process.
You can avoid this by simply going through a mortgage pre-approval stage with one or more local lenders.
Mistake #2: Purchasing a Home Beyond Your Means
Many first-time homebuyers are unaware of their housing budget. This is not surprising given that determining your property purchasing budget is dependent on a number of things. As a result, it is possible to fall in love with a home that is out of your price range.
To avoid this mistake, create a budget with the help of a mortgage lender and stick to it! Remember that your monthly payment will include all applicable taxes, utilities, mortgage insurance, and other charges. Calculate your closing expenses to calculate how much cash you’ll need upfront before you start making monthly mortgage payments.
Mistake #3: Getting a New Credit Line
Credit cards, student loans, and vehicle loans all contribute to credit development, which is required if you want to buy a property. While a new credit line or loan can help you repair your credit in some cases, doing so during the home-buying process can be complicated. Many first-time homebuyers are unaware that applying for a mortgage while also applying for a new credit card or taking out a loan involves requalification. In this case, banks will need to examine your funds. Furthermore, it may disqualify you from a variety of mortgage choices for which you were previously qualified.
You can avoid this by keeping an eye on your credit score. Any activity that has a negative influence on your credit score or debt-to-income ratio can make obtaining a mortgage more difficult. You must first talk with your mortgage lender if you want to secure another loan or establish a new credit line.
Mistake #4: Letting Go of Critical Credit Lines
Just as opening new credit lines can harm your credit and ability to qualify for a mortgage, closing credit lines can do the same. This is the mechanism used by FICO to calculate your credit score. If you have three credit lines and cancel two of them before getting a credit report, your credit score will suffer greatly!
You can avoid this by not closing any accounts or credit lines in time for your mortgage application. Consult your mortgage lender if you’re concerned whether deleting an account may hurt your credit.
Mistake #5: Depositing Funds That Are Unaccounted For
Many first-time homebuyers work hard to save money. Typically, this entails combining monies from many sources. When it comes to mortgages, banks prefer sourced deposits over unsourced deposits.
You can avoid this simply by giving the right sources. If you plan to make large donations or transfers around the time you apply for a mortgage, be careful how you explain it. Banks dislike it when you pretend that you just have cash on hand.
Buying a home or property may be your biggest investment, ever. This is why, as a first-time home buyer, you should know how to do things right. By planning early, securing sourced funds, and getting mortgage pre-approval, you’ll be well on your way to getting your dream home. So, don’t hesitate to reach out to professionals to help you make informed and guided decisions!
Are you in need of a 30-year fixed mortgage in Utah? Clayson Mortgage is here to offer professional services to first-time buyers and refinancing homeowners looking to change their lives. Give us a call today!