Purchasing their first home is a lifetime achievement of several homebuyers. Considering how big an investment it is, it also comes with a lot of risks and uncertainties. Meaning, several things can go wrong if you’re not vigilant during your home buying process.

If you’re buying a home for the first time, this article is for you. We have listed five common mistakes people make while buying their first home. Be sure to read all so that you don’t make these mistakes and make an informed buying decision.

First Mistake: Overspending

It all starts with the budget. Before you hop on to the home options, we’d suggest you analyze your budget. It will give you a clear idea of what range to target, and how much monthly EMI you would be able to easily pay.

Usually, your recurrent mortgage installments shouldn’t exceed twenty-eight percent of your monthly gross salary. This percentage needs to be reduced in case you need to pay other monthly debts. Take your fixed current income into account, prepare real estimates that can be achieved, and avoid anything that is not needed.

Second Mistake: Sidelining the Mortgage Process

The banker calculates your debt-to-income ratio & credit report to determine if you are eligible for a mortgage and the interest rates. The debt-to-income ratio is the difference between how much money you earn and how much you owe.

This process usually takes a lot of time for new homebuyers. There are several documents required for this process. The common ones include financial account statements, address proof, pay stubs, and tax returns. However, the banker can ask for more documents depending upon the situation. You need to be prepared with all these documents beforehand to avoid hassles and to ensure a smooth paperwork process.

Pro tip: Make sure that your credit score and debt-to-income ratio are above par for an easy verification and mortgage approval process.

Third Mistake: Not Understanding Preapproval & Pre-qualification

Prequalification & Preapproval are different terms, which many first time homeowners end up confusing with. You get an idea of your house’s price range when you’re “pre qualified”. However, being prequalified doesn’t mean you’re preapproved for the loan as well. However, it can make the process easy.

Pre-approved loans are conditional. Your ability to pay the installments and credit amount is estimated by a lender or an underwriter, depending upon the income and credit documents. Ensure that the underwriter or lender who has pre approved your loan has gone through your credit score before pre approving the loan.

Fourth Mistake: Not Hiring A Home Inspector

The home inspection is a process where a professional inspector inspects your to-be home for structural and other defects. They are experts in pointing out potential issues that can become an eyesore for you in the future.

If the Home Inspector spots big defects in the home, they usually prepare a detailed report outlining them and the costs associated with the defects. This report can help you renegotiate the property price. You can also consider aborting the buying process if the Home Inspector shows you proof of big defects that will dent your pockets severely in the near future.

However, many first-time homebuyers aren’t aware of Home Inspectors’ importance and skip this part. Ensure to check out Delaware home inspectors if you’re looking to buy a new home in the Mid-Atlantic region.

Fifth Mistake: Not Including The Closing Costs In Budgeting

Closing costs include the title insurance & attorney fees, and amount to three-five percent of your property’s buying price. Many homeowners do not include the closing costs in their budget, which affects their final budget.

The Bottom Line

As a first-time house buyer, you may think buying a new house is all about connecting with a real estate agent, a little paperwork, and possession. However, several factors contribute to successful new house possession. Ensure that you don’t make the five mistakes we have discussed in this article, and you should be good to go!