Are you looking to buy your first home? While you may be excited about the purchase, you need to be wary of certain mistakes. Unfortunately, first-time home buyers have been repeating the same mistakes over the years. Here are a few mistakes to avoid during the process.
1. Failure to Budget
The first step of the process should be to determine the amount you are willing to spend on your new home. If you don’t know what you can afford to spend, you may waste a lot of time and money visiting the wrong houses.
Many first-time homebuyers seek to purchase their home and get a loan with manageable monthly payments. That way, they won’t need to worry about large expenses. However, aiming low is always a brilliant idea.
You can use a mortgage availability calculator to avoid this mistake. It helps you determine what is within your budget and what may be too high. Mississippi has some great home buyer programs that may be within your budget.
2. Making a Very Small Down payment
While the down payment for your new home doesn’t need to be very high, it shouldn’t be too low either. You should leave a 20% down payment for your new home. Some programs may allow you to get your new home with as little as a 3.5% down payment.
According to NerdWallet, 11% of homeowners under 35 feel that they should have waited to have a bigger down payment before buying their first home. Your goal should be to ensure that your down payment can secure your monthly house payment.
You can avoid this mistake by determining how much you need to save before buying your home. The bigger your down payment, the smaller your mortgage. Your monthly payments will be a lot lower.
Make sure your down payments help you secure monthly payments that you are comfortable with.
3. Not Knowing If to Pay Discount Points
You will need to pay mortgage discount points upfront to lower your interest rates. Your savings will add up over the lifetime of your mortgage. Discount points are a fantastic way to gain your saving rates high.
If making minimum down payments is your accomplishment, your choice should be simple-you don’t need to get discount points. If you have insufficient cash on hand, the value of your buying points depends on whether you will be living in the home longer than your ‘break-even’ period. It refers to the period it takes your monthly savings to exceed your upfront costs.
4. Underestimating Homeownership Costs
The cost of homeownership can be high, and you need to be prepared. Once you buy your home, the monthly expenses start piling up. You must be prepared to care for them and not just your mortgage.
You’ll need to take care of the gas bill, the water bill, the cable bill, and the oil bill. Your mortgage lender doesn’t care about these payments. They expect you to continue making timely payments.
Even though renters also have these bills, running a new home costs more. You may need to cover new expenses like homeowner association fees.
You can navigate this issue by working with a real estate agent. They will help you understand the neighborhood insurance and property tax costs. Ask your seller for the house’s utility bills going back 12 months when the home was occupied. This way, you can estimate how much it would cost to run your house.
Buying a home is just as exciting as it is daunting. While you may be thrilled to get your new home, there are plenty of possible mistakes. However, with some effort and research, you can get your new home without falling into common pitfalls.
Consider enrolling in homebuyer education to make your journey easier. Consult professionals to identify potential hurdles and prepare for what’s to come. Common mistakes to look out for include: underestimating your homeownership costs and making minimal down payments. Budget for your move and know when to pay discount points.