Being a first-time homebuyer can be an exciting but sometimes overwhelming experience. Too often, homebuyers get started without fully thinking through all the steps in the process.
Before jumping into buying a home for the first time, plan ahead and talk to a lender early on, so you can avoid these common mistakes:
1. Not setting a budget.
First-time homebuyers should always set a realistic budget. Take a look at your debt-to-income ratio before even shopping for houses.
When looking at what kind of mortgage payment you can afford, factor in your total household costs along with other fixed expenses. You must account for reoccurring costs such as car payments, student loans and credit card bills, when calculating a mortgage payment you are comfortable with.
2. Overlooking hidden costs.
While the down payment commonly comes to mind when thinking about budgeting for a house, there are other up-front costs involved as well. Don’t forget about fees for applications, inspections and appraisals.
Factoring in these costs is crucial in assessing whether or not you can afford to buy a home. Even though there are some mortgage offerings still out there for 100 percent financing, it can be difficult to qualify. Make sure you have enough money saved so you can cover at least some of the expenses out-of-pocket.
If you’re uncertain, speak with a loan officer to make sure all fees are included in your projected budget.
3. Not having the necessary documents for the application process.
There are certain guidelines that lenders must follow in order to approve a mortgage loan. When you apply for a mortgage, a lender will have to look at your bank accounts and transaction history, along with a handful of other forms.
Lenders will need to know where your money for the purchase is coming from, which means having to verify any large deposits. Put any cash you’re setting aside into a savings fund. If it’s stuck in a sock drawer for safekeeping, lenders won’t be able to verify the source or take it into consideration.
4. Not looking into insurance rates and taxes.
When looking at homes, research what the insurance rates and taxes might be for each neighborhood, as these can vary by location.
Take flood insurance, for example. Before falling in love with a house, check to see if it’s in a flood zone. If it is, you’ll then want to look at elevation levels and how much flood insurance might cost for that area.
Research public records or talk to a mortgage professional to get a better idea of local taxes and insurance.
5. Not getting a home inspection.
After finding a home you’re interested in, get a survey and home inspection. This is a critical step that borrowers shouldn’t overlook.
A home inspection will make sure the house is structurally sound and that it won’t need extensive repairs. You don’t want to get into a house and realize it needs more work and money put into it than anticipated.
6. Paying an agency that is offering a “quick” credit cleanup.
Don’t trust agencies that claim to quickly fix your credit. They may end up doing more damage and could hinder your home buying process. Instead, speak with a reputable service provider for help with credit.
7. Making large purchases before closing.
Don’t go on any shopping sprees for goods to spruce up your new home until after closing. Any major purchases made before your closing date might hinder the process and delay you getting into a new home.
The best thing to do is lay low in terms of spending once you start the process of purchasing a home. Stay away from making major transactions from the time you apply for a mortgage until after closing.
8. Not asking your lenders questions.
The worst question is the one that isn’t asked. Too often we go through the process and a problem arises because the borrower was too shy to ask the lender for advice.
For more information about mortgages or other banking needs, contact USAmeriBank’s St. Petersburg branch at 727-394-3164. Scott Gibertini NMLS: 337469, USAmeriBank NMLS: 456668.
Scott Gibertini, USAmeriBank
Scott Gibertini brings more than 24 years of business and banking experience to the USAmeriBank team, providing clients with information and tools to make home financing decisions.
He received a bachelor’s degree from the University of South Florida and graduated from the Florida Bankers Association’s Florida School of Banking program.