Buying your first home is an exciting time that’s often fraught with emotions — both positive and negative. You can successfully navigate the homebuying process by knowing what pitfalls lie ahead.
Here are some common mistakes many first-time homebuyers make and tips to avoid them.
- Not having a clear understanding of how much house you can afford. There’s no point in looking at homes that are out of your price range. Use a mortgage affordability calculator to help you figure out a monthly payment that fits within your budget. Some experts suggest aiming for a home that costs less than you think you can afford. This gives your budget some wiggle room so you won’t feel financially stressed by life’s unexpected twists and turns.
- Not monitoring your credit report. Mortgage lenders will be examining your credit reports to determine how much to lend you and at what interest rate. Mistakes could cost you — with higher interest rates. Request a copy of your credit report from each of the three main consumer credit reporting companies, Equifax, Experian and TransUnion at AnnualCreditReport.com. If you find errors, you can dispute them. You can also get a free Credit Report and Score Review with one of our credit experts.* Give us a call at 800-656-4328 and ask for our Member Services department.
- Not looking into special programs for first-time buyers. If you don’t have the funds for a 20% down payment, look into mortgages backed by the federal government that require as little as 3% down. VA mortgages are sponsored by the Department of Veterans Affairs and may require no down payment if you’re eligible. Consider 30-, 20- and 15-year fixed rate mortgages, as well as adjustable-rate mortgages, or ARMs, which offer a low interest rate in the early years of the loan. Hanscom FCU has a special first-time homebuyer’s program that can help you buy a home with no money down. Learn more here.
- Not getting preapproved for a mortgage. Being prequalified for a mortgage means a lender confirms in writing how much you can borrow and at what interest rate. It sends a strong message to sellers that you’re serious about buying a home, which can give you an advantage over other buyers who might not be prequalified.
- Not setting aside savings to cover closing costs. Expect to pay anywhere from 2% to 5% of your loan amount on closing costs. Shop around to save money on your homeowner’s insurance, home inspection and title search. You may be able to negotiate a lower commission with your real estate agent and have the seller pay a portion of your closing costs.
The mortgage specialists at Hanscom FCU can help you buy a home you love. We’ll work with you to determine a loan amount that fits your budget and help you find the right financing so you can shop for your first home with confidence. To learn more, stop by a branch location, visit www.hfcu.org/mortgage or give us a call at 800-656-4328.
Our First-Time Homebuyer's Handbook can help you navigate the process of finding and financing your first home. It's free and you can download it here.
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* Note that Hanscom FCU's Credit Score and Report Review requires a hard pull on your credit, which will temporarily reduce your credit score.