Some claim that working with a trustworthy lender could minimise the problems you may encounter when buying property for the first time, but first time home buyers should also learn to take responsibility for their budget and choices.
If you want to successfully buy a house hassle-free, then better not commit these common financial mistakes:
Not getting prequalified for loans
Some financial advisers told me that getting prequalified for a mortgage should be the first step that every first time home buyer must take. However, most buyers only contact lenders when they are already looking for a house to buy.
Stephen Adamo, President of Weichert Financial Services, explains that this step allows buyers the chance to correct any entries in their credit report. It also helps them make financial goals and strategies in preparation for the gruelling process of buying property.
Some buyers may need to spend up to a year saving more money, increasing their incomes or cleaning up their credit before making an offer on a home, added Adamo.
This concept is pretty new. Back when I was helping out my daughter buy a house, we just went to the bank to get a loan when we found a suitable house. But I do believe that seeing lenders early on can help buyers understand the shortages of their documentary and financial requirements and this makes the process easier in the long run.
Applying for the wrong mortgage type
It’s standard for many first time home buyers to get a 30 year fixed-mortgage back in the old days, but now that lenders are starting to offer other types of mortgages, some financial advisers claim that it may be the better choice for first time home buyers.
Michael Harrison, regional manager at U.S. Bank Home Mortgage, explains that those who want to build equity and those who want to live a debt-free retirement should choose 15-year fixed-rate loans or even 10-year mortgages if they have the money.
A 5/1 adjustable-rate mortgage is also a better alternative for people who are certain their companies will relocate them within five years.
Borrowing the maximum amount allowed
Many first time home buyers I’ve helped are optimistic that they’ll be able to pay their monthly mortgage payments whenever they apply for a loan. So they always opt to borrow the maximum amount that they can from the banks.
There’s nothing wrong with being positive about your future prospects. In fact, you can’t help feeling positive when buying a house because it is a big achievement that not everyone can achieve! That being said, it also doesn’t hurt to be a realistic especially when making financial decisions.
Financial advisers say that first time home buyers should instead compute how much they can spend every month before they even meet with a lender. And this amount should give them enough wiggle room in case their situation changes later on, like when they experience partial loss of income or start having children.Tags: buy a house, buy a house for the first time, buying property for the first time, first time home ownership