Financial Mistakes to Avoid When Buying a Home


As a homebuyer, navigating the financial responsibilities of buying a home can be incredibly challenging. Most newer homebuyers are unaware of all the costs associated with buying and owning a home – but are quickly made aware of them if they are working with a good real estate agent. The following are five tips to help ensure that you don’t make these financial mistakes when buying your first home.

1. Don’t Focus On Distressed Properties Because You Think You’ll Find A Good Deal

A lot of first-time homebuyers will explore distressed properties, such as foreclosures or short sales, in the search of a bargain. 

If you’re looking to invest your money, then a distressed property can be a great deal. But, you'll need to have plenty of time on your hands. If you’re actually looking for a home to move into, what we call move-in ready, then you don’t want to waste your time looking at distressed properties.

Deals for distressed properties can not only  take months to close, but the amount of money you may have to put into renovations sometimes is more of a headache than its worth! Spending all of your time looking at distressed properties could also result in missing out on well-priced homes that may have suited all of your needs.

As a homebuyer, keep in mind that you are looking for a new home first and foremost — bargains are nice, but you shouldn’t be focused on finding one. Focus on finding what you love and need, let US worry about getting you the great deal! 

With our extensive Real Estate Investment history, we're happy to help you find a good 'fixer-upper' property if that has always been your dream! It's important to know what to look for, let's chat and save more of that $$ for YOU + your family, rather than a busted roof! 

2. You Don’t Need To Borrow The Full Amount That Your Lender Is Offering

Just because you are approved for a mortgage doesn’t mean you have to borrow the full amount that the lender is offering. 

A general rule of thumb is to borrow around 10-15 percent less than what the lender is offering. So if the lender has approved a $350,000 mortgage, you should consider only looking for homes priced at $315,000 or less. Ultimately its smart to consider your overall MONTHLY budget! There are great properties in all price ranges! Just takes the right agents to hunt them down! 

This will help to protect you financially. 

The amount offered by the lender is typically the most that they are comfortable lending to you in terms of what they think you can pay back on a monthly basis. This means that you could end up feeling pinched on the monthly mortgage payments if you take out the full amount — and you don’t want to be financially uncomfortable. Our financial team will ALWAYS be sure to run each scenario out with you ahead of time, so that you never have to feel like you are crunching numbers, OR pennies! 

3. Think Twice About Getting A Short-Term Adjustable-Rate Mortgage

A short-term mortgage is going to cost you an arm and a leg every month. Yes, you will end up paying off your loan sooner, which will help relieve your debt. But is it worth the financial discomfort? Not to mention that an adjustable-rate means that you’ll never know how much your mortgage payments might be — it could vary from month to month.

A longer-term fixed-rate mortgage is a much safer play. 

With a fixed-rate mortgage, you’ll know exactly what you’ll be paying every month, making it much easier to budget. A long-term mortgage isn’t as bad as it might sound either. You may be making payments for 15 to 30 years, or until you decide to sell and size up or down,  but remember those payments aren’t going to seem like that much after a decade or two since they will remain constant throughout, even with inflation.

4. Don’t Use Up All Of Your Cash In Order To Buy The House

Make sure that you prepare for the costs associated with buying a home, from the down payment to the appraisal fees, agent fees, lawyer fees, and more. We love to take extra great care of our clientele and strive to make the purchase of a home, as inexpensive as possible as far as your initial out of pocket expenses! We've pledged to always provide help in any way that we can to put a few extra hundred, back into your wallet! 

But it is always great to prepare, again our finance team will gladly outlines some of the upfront expenses in order for you to be prepared. Additionally there are SO many great options for Down Payment Assistance programs, Grant opportunities, first time homebuyers programs, VA benefit programs and more! 

Some expenses to consider are your mortgage payments, homeowners insurance, HOA fees, property taxes and more.

When saving up money, keep all of these costs in mind. You don’t want to end up emptying out your savings account by your very first day as a homeowner, as this can end up putting you in sticky financial situation.

5. Review Your Credit

The homebuyer's credit rating is typically a very important factor we getting approved for a loan. 

Just because you pay your dues monthly on time does not mean your credit is outstanding. The amount of credit you use relative to your available credit limit or your credit usage ratio can sink your credit score assessment. Moreover, the lower the usage rate, the higher your score will be. Ideally, first-time homebuyers would have a lot of credit available, with less than a third of it used.

Some financial lenders have a credit doctor service, known as rapid re-scoring, available through their credit reporting company. This service allows them to run statistical credit modeling: the lender plugs in a certain credit score needed, an algorithm analyzes your complete credit portfolio and outlines what can be done to get you to that aforementioned threshold. We are happy to provide our clientele with a roadmap to getting your credit right where it needs to be in order to qualify for a great rate! 

Oftentimes, high credit utilization (the amount of debt you are carrying versus your total available credit) is the culprit for a low score. In those instances, paying down certain credit accounts could make you more creditworthy — and mortgage eligible — within short period of time. The options are endless, and ultimately it is about being 'in the know" there is nothing we love more than EDUCATING! If you've got any questions at all, or want to ensure that you'll be able to purchase down the road, be sure to reach out. 

Buying a home can be both exciting and daunting at the same time. But because there is so much on the line, financially speaking, you’ll want to make sure that you do your research and speak in detail to your real estate agent (or agents ??) in order to prevent yourself from making any potentially costly mistakes, whether it’s borrowing the full amount of the mortgage you’re offered or using all of your savings to buy the home.

We're here to help! 

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