Often, knowing what not to do is as important as knowing what to do. This is especially true when buying a home for the first time. There are many mistakes that a first-time home-buyer can make, and financial mistakes can be the most costly. The following are three of the important mistakes you need to avoid.
House hunting before qualifying for a mortgage
Too often new buyers will look for a house, and then go shopping for a mortgage. This can be a mistake, because you may waste time looking for a house that you won't be able to qualify for. With pre-approval from a lender, you will know exactly what houses are available to you, and if you find something you like, the offer you make for the home will be taken more seriously by the seller than one from a buyer who does not have the financing in place. In addition, if you can't find a home within the price range you are pre-approved for, you can stop searching and wait until you can get better financing in the future.
Buying more house than you can afford
There are a variety of factors that go into getting approved for a mortgage. Most of these factors you are likely aware of: credit score, income, liabilities and assets. However, just because you qualify for a mortgage does not mean you can afford it. After learning how much a lender will finance, you will need to look at what you can afford in a monthly payment. You need to look at all of your expenses, especially those that a lender will not look at-- specifically, your discretionary spending. How much money will you have each month for entertainment or your hobbies? New buyers can easily buy too much house, and spend all of their extra money on a mortgage payment.
Not calculating all of your house expenses
If a new buyer avoids the two problems listed above, there is still the issue of expenses related to the maintenance of the house. Just like a car, a house will need maintenance and repairs, so you will have to factor this amount into your monthly budget. How much this will be is dependent upon the age of the house as well as its size and value. Examples of common repairs are clogged drains, repaving your driveway and window repairs. Also, there will be expenses you are not currently paying while living in an apartment. Things such as water, trash and pest control may be new monthly expenses for you. Real estate agents can often be helpful in calculating these expenses.
Purchasing a home for the first time can be an exciting time in your life, but you want to do it the right way. By avoiding the three mistakes listed above, you are less likely to suffer financial consequences.