As a first-time homebuyer, this is probably the biggest purchase you’ve ever made. (No pressure.) To help you navigate the process, we Skimm’d some of the most common money mistakes first-time homebuyers make. Plus, how you can avoid them.
The most common first-time homebuyer mistakes to watch out for as you start your search…
1. Only getting one interest rate quote.
The only thing more important than shopping for the right house is shopping for the right mortgage. Because not all banks or lenders offer the same interest rates. Shopping around and comparing quotes could help you save big. Your move: Get more than one quote and compare interest rates, points, and closing costs to find the one that’s the best for you.
2. Overlooking first-time homebuyer grants.
There are lots of state, local, and even federal programs and credits available to first-time homebuyers. Taking advantage of them could help you save on your down payment and closing costs. So, a little searching now could pay off big in the long run.
3. Forgetting to check their credit scores in advance.
Getting your credit score in shape to buy a house is critical. And it takes some pre-planning to do it right. Make sure your credit score is as high as it can possibly be. (Psst…disputing any errors you find on your credit report and paying all your bills on time can raise your score.) And, make sure your bank account is in good shape to buy, too.
4. Applying for credit while buying a home.
Thinking about getting a new credit card or taking out an auto loan? Don’t do it once you start the homebuying process. It can ding your credit score and majorly mess up your ability to get your mortgage.
5. Hitting open houses without a pre-approval.
In today’s competitive housing market, you’re going to want to secure a loan before you start looking for a house. And if you want the best shot at buying the house you fall in love with, get pre-approved. That way, you’re in a position to move quickly.
6. Draining their savings.
A down payment is a major expense. But if you have to drain your bank account to make it happen, you might be buying a house you can’t afford. Having an emergency fund, even when buying a home, is critical. You don’t want to be caught without that money if you happen to need it. (Remember: It’s called an “emergency” fund for a reason.)
7. Miscalculating the hidden costs of homeownership.
Buying a home isn’t just a big investment upfront. There are also a lot of costs that go into maintaining it once you live there. Depending on the house’s condition and age, plan to budget about 1% to 4% of the home’s purchase price to maintain it each year.
Being a first-time home buyer can be daunting. But staying informed, doing your research, and having the right pros on your side can help you more easily navigate the process. And avoid making any major money mistakes along the way.
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