Two Mistakes To Avoid As A First Time Home Buyer

Before you purchase your first home, there are many decisions that you must make. These decisions are not only exciting, but they can also be downright scary at times. It is very easy to get caught up in the excitement that surrounds buying a new home, and unfortunately, this is the window of time during the process where mistakes can be made.

First home buyers

If you have decided that you are ready to buy a home for the first time, or you are ready to purchase another home, having the right knowledge will save you a lot of stress and anxiety later on. Here are some of the most common mistakes that are made by first time home buyers, and how to avoid making these mistakes when you are on the hunt for a new place to call home.

House Hunting Before Meeting A Mortgage Lender

We have all been guilty of it. We take a weekend stroll and drive through different neighborhoods to see if there are any houses for sale. However, this is one of the biggest mistakes that home buyers make.

You should never start viewing homes and attending open houses before you speak with a mortgage lender.

In larger markets, the housing market is very competitive and fierce. This means that you may find that you are in a position where you have to stretch your budget in order to get a home that you want because you did not get pre-approved for a loan first.

What you should do before you fall in love with your dream home is to make sure you have pre-approval first. By making sure you are pre-approved will show the lender that you are serious about purchasing a home.

Not Being Careful With Your Credit

During the preapproval process, mortgage lenders do pull credit reports. They do this to make sure that everything checks out before you even start looking for a house to buy. Lenders also complete a preapproval before the loan closes. This is done to ensure that nothing has changed with your credit during the home buying process.

Opening new credit card accounts or applying for new loans during the home buying process can jeopardize your closing. This is one lesson that first time home buyers typically learn about the hard way.

Your credit goals should be to keep your finances and credit the same from pre-approval to the closing. So, what does this mean? Do not open new credit card accounts, make large purchases on existing accounts or apply for new loans. Also, pay all bills on time and try to pay your existing balances down below 20 percent of the credit limit you have available.

Buying a home for the first time can be very overwhelming. Fortunately, this process can be streamlined and less complex by avoiding mistakes that can cost you the house of your dreams.

Using A Mortgage Broker

Mortgages Now - Using a Mortgage BrokerInvesting in a home is probably one of the most important purchases you’ll ever make. Most buyers spend weeks, even perhaps months searching for an ideal home. But when it comes to financing that purchase, much too often buyers are prepared to consider the first option that comes along or they believe their current bank will be able to provide them with the best home loan option on the market.

Not shopping around for the best mortgage could and will cost thousands of dollars in extra interest over the lifetime of the loan.

A large number of buyers make the assumption that their local bank will approve any mortgage application and give them the best deal since they are current customers and probably have been customers for quite some time. This could also cost thousands in extra interest over the term of the loan.

The reality is that a savvy buyer will pay just as much if not more attention to the details of the financing as to the house their purchasing.

So what are the options out there? How do you find the best deal and a mortgage that will suit your situation without spending the next 3 months doing research?

Let’s look at what happens if you go to your current bank;

  1. You will see the lending officer at your local branch (if they still have a local branch) who will discuss with you the amount you wish to borrow
  2. They will check your financials, make sure that you are able to service the loan repayments and also check your credit rating
  3. Then they will advise you if your application has been approved, and if so you will most likely pay a hefty application fee once the loan is drawn down

Now on the other hand, mortgage brokers don’t work for one particular lender – they typically have a relationship with many lenders. This translates to many options from many lenders.

Since mortgage brokers do not represent any single lender, this works to your advantage.

For example, take a buyer with a really good credit history and a decent deposit who simply wants a mortgage with no bells and whistles and the lowest interest rate. A mortgage broker will know what their partner lenders’ interest rates are and be able to present the best mortgage options in a reasonable timeframe. No work on your part.

Alternatively, if your credit rating is not that great, a mortgage broker will save you hours and hours visiting all of the local banks applying for a mortgage, not forgetting it might pull your credit rating down further with all the credit inquires! Additionally, you wouldn’t know about particular lenders who specialise in lending to people with poor credit ratings.

Another advantage of a mortgage broker is that have a lot of experience with different financial situations. This allows them to offer solutions to problems that you might not have thought of.

Your mortgage broker will do all the work for you, from finding the most suitable mortgage to completing and lodging paperwork. This saves you so much time and your chances of loan approval will be high because the mortgage broker would have already pre-qualified you.