First Time Homebuyer Pitfalls

Common Mistakes and Misconceptions to Avoid

1) Lack of credit – Check/monitor your credit and fix any problems before you start looking at houses. You typically need a 620 credit score or higher to qualify for a mortgage!

2) Not knowing how much you can afford – Find a home with a monthly payment you can afford. Talk with a local mortgage broker to find out what payment you can qualify for at today’s mortgage rates.

3) Lack of cash to work with – You’ll need enough cash put away to cover most if not all of the following:

  • Down payment
  • Earnest money deposit
  • Inspection and appraisal
  • Closing costs
  • Prepaid interest
  • Typically 2-6 months of reserves equal to your new house payment
  • Upfront escrows for property taxes and homeowners insurance

4) Stuck in lease agreement – Don’t let a long lease drag you down.

  • Negotiate an early exit from the lease
  • Expect to pay approximately 1.5 months’ worth of rent plus loss of security deposit to break the lease
  • Try to avoid finding sub-leasers or paying the entire lease off

5) Less than full commitment – Finding a home isn’t a weekend “honey-do list” type of project. On average it takes 12 weeks of searching before finding the right home. Keep communication active with your realtor and lender.

6) Can’t find a home – Find a home that fits your needs, not just your tastes. Make a list of the basic essentials that your home needs to have. If you find the right home, pounce on it!

7) Small down payment – Determine a down payment that fits your budget. If you put less than 20% down, you will have private mortgage insurance on the loan, which increases your monthly payments.

8) Realtor not getting the job done – When your realtor doesn’t fit your needs, ask for a referral from your mortgage broker or friends and family that have had a successful transaction with someone they loved working with.

9) Lender communication – Keep your lender in the loop during the entire process, especially if you make other large purchases or sudden career changes.

10) Too busy at work – Find ways to be available during the week for your lender and realtors, even if it means spending your lunch break returning calls!

11) Emotional attachment to a home – Your new home has no feelings! Don’t get emotionally attached to that kitchen, stick to the facts.

12) Not getting an inspection – Home inspections are a no-brainer! Get one! Make sure the home is in good standing and have a true idea of what work needs to be put into it so you don’t get in over your head.

Content from First Commerce Financial –

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