Buying a home for the first time is an exciting life step. It’s only natural to get caught up in the thrill of the experience. And, like with anything you try for the first time, mistakes can happen.
We’ve rounded up some of the most common mistakes first-time homebuyers make, and tips on how to avoid them, so that you can learn from the homebuyers who have gone before you.
Not being proactive about your credit score.
A big contributing factor to qualifying for a mortgage is your credit score. However, many first-time homebuyers may not have built up a credit score yet or understand how their credit score impacts their mortgage options. Rest assured, you can still get a mortgage if you have a less than perfect credit score.
Want to get your credit score “mortgage-ready” before you start house hunting? The simplest thing you can do is to make your payments on time. Whether you have student loans, car payments, or credit card debt, on-time payments will go a long way toward building your credit score. If you’re like me and the first of the month always sneaks up on you, set up auto-payments so that your payments automatically stay on time.
Misjudging down payment requirements.
You may have been told that you must make a 20% down payment to get a mortgage. This is simply not true. While certain types of mortgages may stipulate that you need to pay 20% of the home’s value upfront to avoid having to pay private mortgage insurance, there are plenty of low and even no down payment loan option to choose from at PrimeLending.
PrimeLending offers several popular loans for first-time homebuyers that require low or no money down. The most common options are government-backed home loans.
- FHA mortgage – An FHA home loans is backed by the Federal Housing Administration (FHA) to help low- to moderate-income borrowers by offering a smaller down payment than conventional loans. FHA loans require as little as 3.5% down, have flexible income and credit requirements, and often offer lower closing costs.
- USDA mortgage – Backed by the United States Department of Agriculture (USDA), this home loan provides an alternative mortgage option for homebuyers in rural areas. With no down payment required, lower interest rates, and flexible credit requirements, this location-based loan helps make homebuying more affordable for first-time homebuyers.
- VA mortgage – This home loan is backed by the United States Department of Veterans Affairs (VA). Designed for veterans, active-duty military members, and qualified spouses, a VA loan offers benefits like no down payment*, no private mortgage insurance, and limits on closing costs.
Putting the house before the mortgage.
I get it, house hunting it probably the most exciting part of buying your first home. But you know what isn’t exciting? Falling in love with a home that is out of your price range. One of the best ways to set yourself up for homebuying success is to start by knowing what you can afford so you can get a better idea of your budget. Using a free home affordability calculator will help you crunch the numbers.
You can take your budgeting even further by getting approved** for a mortgage before you start your home search. When you get a mortgage approval before you house hunt you can maximize your buying power. Knowing exactly what you can afford can also give you more power at the negotiating table to stand out to sellers as a serious buyer.
Getting a mortgage you don’t understand.
One of the most important parts of getting your mortgage is understanding how it works. You may come across terms like “principal” and “debt-to-income ratio” that leave you with more questions than answers. But, with the right lender by your side to guide you through the process, you can better understand every aspect of your mortgage.
PrimeLending loan officers are local market experts, so they know how to find a mortgage for your long- and short-term homeownership goals. Think of them as your guide for all things homebuying. You can count to them to help you navigate your homeownership journey from application day to closing day and beyond.
Whenever you embark on a new adventure in life, who you have by your side makes all the difference. Contact your local PrimeLending loan officer today to start your journey to your dream home.
*Down payment waiver is based on VA eligibility.
**All loans subject to final credit approval and acceptable property. Conditions and restrictions may apply.
