Written by Brittani Thurlow
For many first-time home buyers, the goal is to purchase a house and get a loan with a comfortable monthly payment that doesn’t keep them up all night. Even though everyone’s experience purchasing and financing their first home varies, you can prepare yourself for what is to come by learning what helped or hindered others. Before embarking on your home buying journey, here are some do’s and don'ts to steer clear of common errors.
DO get pre-approved!
Please note, I said pre-approved, not prequalified. They are different!
Pre-approval is a process that involves a review of your income, credit and expenses. Lenders review your credit report in-depth to get a sense of your debt-to-income ratio. Your pre-approval is backed by data! You can actually start your mortgage application with a lender and receive a conditional commitment for a mortgage. Not only does this make closing easier and faster, but a pre-approval can make your offer more competitive.
DO check the accuracy of your credit score!
Your credit score is one of the most important elements when it comes to the approval process. Mortgage lenders will review your credit report for established credit, on-time payments and question any derogatory credit history. Your credit score will also determine the level of your interest rate. The better the score, the better the interest rate. Errors on your credit score can lead to interest rates that are higher than you deserve. If you find any errors on your credit report, dispute them! This is not a step to skim past!
DO look into first-time homebuyer programs.
Don’t put your dream home on hold to save every penny. You have access to copious amounts of programs that offer low down payment loans, closing cost assistance, and reduced interest rates depending on your location. Ask your mortgage lender about home-buying options and look at what your city, county, and state offer.
“A smart person learns from his mistakes, but a truly wise person learns from the mistakes of others.”
– Kenn Schramm
DON’T shop for a home before a mortgage.
I know, it is more fun to look at homes than talk about finances with a lender. It’s easy to get swept up while imagining the life you want while walking through homes, but you might be wasting your time looking at properties that you can’t afford. Don’t set yourself up for disappointment when you find the right home then come to find out you are unable to make a serious offer.
DON’T make a down payment that is too small.
Wait! Didn’t I just tell you about programs that offer low down payments? A lot of homebuyers want or even need to make small down payments, but don’t just settle for the lowest you can get. Figuring out how much to save is a judgement call that you will need to make. That being said, a bigger down payment leads to a smaller mortgage and a lower monthly payment.
DON’T underestimate the cost of homeownership.
Don’t empty your savings on your down payment. You could have entirely new bills, such as a Homeowners Association fee (HOA) that you weren’t expecting. There is also the very real possibility of repairs or renovation costs. A good real estate agent should be able to refer you to reputable contractors who can give you estimates on your repairs.
Buying a home may be the biggest purchase you make in your life. Deciding whether you are ready to buy your first home can be very intimidating. Combat your hesitations by asking questions, doing research, and learning from others. The more you educate yourself about the process beforehand, the less stressed you will be.
If you are a first-time homebuyer, consider exploring your options with the experts at Goldwater Bank. We are here to help you throughout your home buying journey.
Feel free to email us or click the chat button to talk with a live agent during open hours. We are typically live from 7:30-5:00 Arizona time.