In this time of social distancing, people are still shopping for houses in Boulder County. Yet even in the best of times, buying a home can feel daunting, especially if this is your first purchase.
Knowing what to do, and perhaps more importantly, knowing what not to do, improves your chances of success. Here are the top 14 mistakes not to make and pro tips on how to avoid them, as reported by Bankrate.com.
1. Don’t start home shopping before securing a mortgage preapproval. As you think about buying a home, it’s tempting to “see what’s out there.” But before you do, find a mortgage lender and get a fully underwritten preapproval. Then you can shop with confidence, know your price range, and your offer will be taken seriously.
2. Don’t talk to just one lender.To ensure you are getting the best rates, lender fees, and loan terms, talk with three lenders and a mortgage broker. Look for a lender who has the knowledge to help you identify obstacles and who is responsive to your requests, and you’ll find the best match for you.
3. Don’t buy a house beyond your budget. Look at your monthly budget and decide which monthly mortgage payment fits comfortably within it. Leave room for other expenses, and then find a house that fits that picture.
4. Don’t move too fast. Start your home-buying plan at least one year in advance. It will give you time to save enough, and to boost your credit score by repairing any poor credit or paying down debt.
5. Don’t spend too much of your savings. This is one of the most common mistakes first-time buyers make. Instead, build an emergency fund of three to six months of living expenses and don’t use it for the down payment. Homebuyers who put at least 20 percent down don’t have to pay mortgage insurance for a conventional mortgage. But experts advise that an emergency fund is more important than the savings.
6. Don’t be careless with credit. Don’t make changes in your credit profile for several months prior to applying for a mortgage and all the way through closing. Whether you open a new credit card, close an account, or make a large purchase, this is a red flag for lenders. Instead pay down your existing balances to below 30 percent of your available credit limit, and pay your bills on time and in full every month.
7. Don’t buy a house you love in a neighborhood you don’t. It’s all about location in real estate, but it has to be the location you want, not just a popular area. Pick the neighborhood which suits your values and lifestyle. Check commuting time and traffic for drives to work and school.
8. Don’t make emotion-based decisions. Home is where the heart is, but when you’re buying a house you want to keep emotion out of it. Competitive housing markets fuel your emotions. Remember, have a budget and stick to it. A good Realtor will help guide you through the process.
9. Don’t assume you need 20 percent down. The median down payment is 13 percent, according to the National Association of Realtors. Putting down less than 20 percent means you have to pay mortgage insurance, but it can take years to save that much. Instead, consider a government-insured loan that requires 3.5 percent down. Check to see if you qualify for housing assistance programs for first-time buyers.
10. Don’t wait for that perfect home. Looking for the perfect property can limit your search and may lead you to overpay. Instead, keep an open mind and be willing to put in some sweat equity. You’ll find a home faster.
11. Don’t overlook FHA, VA, and USDA loans.
12. Don’t miscalculate the hidden costs of homeownership.
13. Don’t forgot to pre-plan the process for using gift money .
14. Don’t forget to negotiate a homebuyer rebate.
Read the full story at bankrate.com/real-estate/first-time-homebuyer-mistakes.
By Tom Kalinski, RE/MAX of Boulder. Tom is the broker/owner of RE/MAX of Boulder, the local residential real estate company he established in 1977. For questions, e-mail Tom
at [email protected], call 303.441.5620 or visit boulderco.com.