Buying a home is a major decision that can have disastrous long-term side effects if done improperly. Below introduces four of the biggest mistakes that people make when buying a home.
Failing to Plan a Budget
The biggest mistake that people make when buying a home is being unaware of what they can truly afford. Prospective homeowners must remember that what the bank or real estate agent says they can afford and what they are actually comfortable with paying are totally different things. Make a current budget by listing every kind of monthly expense, such as groceries, insurance and retirement savings.
Be sure to include car, credit card and student loan payments. There are also scheduled annual expenses, such as insurance premiums, and unscheduled annual expenses, such as medical costs for health conditions. After adding a small amount for savings, there will be a realistic budget that will let homebuyers know how much they truly can spend on their new home every month. When budgeting, be sure to plan for future events, such as replacing an old car, returning to school or having a baby.
Failing to Get Pre-Approved
Many homebuyers misunderstand the differences between being pre-qualified and pre-approved. Pre-qualification is the standard first step of the mortgage process. Homebuyers simply fill out an application with their bank or lender, which includes a comprehensive picture of their financial state. After the bank or lender evaluates the potential homebuyers’ debt, assets and income, they will provide a general mortgage amount that the person qualifies for.
Pre-qualifications are performed over the phone or through the Internet for free and they do not include an in-depth credit report analysis. This quick procedure only provides an estimate and does not guarantee rates or conditions. On the other hand, pre-approvals involve an official mortgage application and detailed documentation. The result of this is that banks and lenders will provide specific pre-approved interest and mortgage amounts. Pre-approvals come with written conditions that easily translate into actual mortgages.
Failing to Find the Right Information Source
Most young homebuyers put too much faith in loan information that is found on the Internet or through their smart device app. Most credit and financial advisors will encourage homebuyers to research mortgages, lending processes and market conditions online. However, the bulk of bad homebuying experiences happens because of misunderstandings over fees, costs and terms.
The best way to buy a home is through talking with different people, such as loan officers, bank representatives and real estate agents. Asking the same questions to diverse people may result in different answers. Through this thorough process, homebuyers can truly understand their qualifications, restrictions, mortgage terms and current market economics. All aspiring homeowners should attend a first-time homebuying class.
Failing to Carefully Inspect the Home
There are always a small amount of homeowners who do not inspect their homes before signing the mortgage papers. These homebuyers think that they will be able to cut costs by skipping the inspection, which typically costs around four to five hundred dollars. However, a thorough three to four hour home inspection may uncover property defects and damage that will cost thousands of dollars down the road.
Bear in mind that it takes a trained eye to catch hidden problems. Many home inspectors will also instruct the homebuyer how to fix and maintain future or potential problems. First-time homebuyers looking for new homes in Utah can also find help through third-party organizations and the Federal Housing Finance Agency (FHFA).
As a final note, it is also a good idea to check with the city or state to see if there are available home loan programs.
Author: Anica Oaks, freelance writer and web enthusiast