Purchasing your first home is likely one of the largest financial decisions you’ve ever made. To avoid making costly mistakes you’ll regret, you must be aware of some of the most common mishaps that first-time homebuyers make. This will help you know exactly what situations to avoid and ensure your homebuying experience goes and smoothly as possible. Here are some of the most common mistakes people make when purchasing their first homes.
Purchasing a home outside of their budgets
When you fall in love with a home, spending a little more than your budget allows may not seem like that big of a deal. However, doing so can lead to a lot of regret later on. Purchasing a home outside your budget increases the likelihood that you’ll eventually lose your home if you experience unexpected financial struggle later on. Plus, doing so puts a strain on your monthly budget for years to come, as you’ll have less money to spend on other obligations such as electricity bills and food. As such, purchasing a home outside your budget is typically riskier and more stressful than it’s worth—you’re better off purchasing a more affordable home. To determine how much you can afford to spend on a home, use a mortgage affordability calculator to get a good estimate of a realistic price range.
Not knowing all their home loan options
Many people can’t afford to purchase homes out of pocket. As such, getting approved for a home loan is typically necessary. If you have poor credit, however, finding a lender who’s willing to approve your application for a home loan can be challenging. As such, it’s important to know all your options so that you can give yourself the best chance of getting accepted. FHA, VA, and USDA loans are some of the best home loan options for people with poor credit. Because they’re government-insured loan programs, lenders take on much less risk by approving your loan and, as a result, are more likely to do so.
Not making a large enough down payment
A common mistake people make when purchasing their first homes is not making a large enough down payment. Some loans allow you to make down payments as low as 3.5 percent of the home’s cost, but this doesn’t necessarily mean you should. Making a down payment that’s too low may result in steep monthly payments that aren’t affordable. In addition, you’ll likely have less favorable loan terms than if you’d saved up for a bigger down payment. You don’t necessarily need to make the ideal 20 percent down payment, but it’s important to make a down payment that’s high enough to give you manageable monthly payments.