Young homebuyers are eager to get their first home, and they often let their eagerness rule their decision making about taking the important steps in buying a home. Even people buying their second home can fall victim to mistakes that will result in serious and long-term consequences. We have identified the 4 big mistakes people make when buying a home.
The biggest mistake that homebuyers make is failing to assess the amount of money they can afford to not only purchase the home but also to pay the taxes, insurance, utilities and other expenses of owning a home. Potential homeowners must keep in mind that what the mortgage lender says they can afford is usually not what they will be comfortable paying. Lenders do not understand the homebuyers lifestyle and all of their financial obligations. Potential homebuyers can avoid this mistake by making a budget that identifies every monthly expense such as groceries, life insurance health care and car insurance premiums, and an amount dedicated to savings. Include the vehicle payment, credit cards, and medical expenses. A review of the checking account and credit card statements will help prepare an accurate budget.
Another mistake arises from a misunderstanding of the differences between pre-qualified and pre-approved. Homebuyers usually approach their buying process by taking the first step which is pre-qualification. This involves a lender or a mortgage broker reviewing the homebuyers’ financial information and making a cursory assessment of the mortgage amount they may qualify for. This is nothing more than a helpful guide for the homebuyers to think about when considering home price ranges. Pre-approvals involve making a formal mortgage application and providing some detailed documentation about work and income history along with a list of current monthly obligations. Lenders will provide specific pre-approved interest rates and mortgage amounts along with any specific conditions. It is a small step from pre-approval to the actual mortgage.
Most young homebuyers turn to the internet or their smart device app for loan information. Many experts recommend this procedure for obtaining mortgage information. However, many homebuyers have come to regret this mistake. The bulk of bad home buying experiences come about from the misunderstandings of costs, fees and terms. Mortgages are a people business meaning that face-to-face discussion with the different people involved such as loan officers, mortgage brokers and real estate agents are essential steps. Homebuyers will get diverse answers from talking with many people, but they will also learn a lot about mortgages and buying a home. This is the process that will really help the homebuyers understand their qualifications and the current mortgage market economics.
The fourth serious mistake is failing to have a home inspected before signing the mortgages documents. This is a serious mistake because a thorough home inspection will uncover defects in the property and hidden damage that could cost thousands of dollars to fix. A highly skilled, experienced home inspector is worth every penny they charge. Keep in mind that only a trained eye will catch the hidden issues.