More Common Mistakes Made by First-Time Homebuyers

Yesterday we discussed two big mistakes that homebuyers make when buying their first home. Here are two more mistakes many people make and how you can avoid them.

Waiting Too Long to Get Prequalified
When you decide to purchase your first home, your first step is going to a mortgage lender and getting prequalified for a loan. However, most first-time buyers start house hunting before they even know how much of a loan they can get prequalified for. When you get prequalified, you will see what your mortgage rates are going to be and you will have a better idea about your credit score and history. If your score is unfavorable, you will be paying high interest rates. You might also start looking at homes that cost much more than you can afford and then get disappointed when you don’t qualify for a loan large enough to buy that home.

To fix this, get prequalified right away. Prequalification should be your first step. Then you can start looking around for homes in your price range. If you don’t qualify for a good interest rate, you can take some time to build your credit score up and then qualify for better mortgage rates. A couple percentage points may not seem like a big deal, but it could cost you thousands of dollars over the term of your loan.

Choosing the Wrong Mortgage
The most popular mortgage plan is a 30-year fixed rate mortgage. As a result, many first-time homebuyers automatically want this mortgage product when they buy a home. However, there are many other plans to choose from, including adjustable rates, interest-only mortgages and more. You can even choose a shorter-term fixed-rate mortgage and pay your home off earlier and pay less interest.

Before you decide to buy a home, research the many types of mortgages that are available to you. Consult with some trusted friends or people who know more about mortgages and the long-term financial effects of interest rates. You may be surprised how much more you would pay over a 30 or even 15 year mortgage just because of a couple percentage points.

The basic thing to remember when buying your first home is this: Take your time, do your research and don’t rush into anything. Buying a home is probably the largest financial commitment you will ever make so don’t take it lightly.