Mistakes that first time home buyers should avoid | Personal Finance Views

Monday, November 25, 2013

Mistakes that first time home buyers should avoid

First time home buyers get very jittery when it comes to taking out a mortgage for their house. There are various mortgage loans just for the first time home buyers which are offered by the government. So, you can search for the mortgage loans that are available for the first time home buyers. Read on to know the loans that are available for the first time home buyers as well as the mistakes you can avoid while taking out those loans.

home buying

Since you’re a first time home buyer, it’s natural that you may not have all the knowledge of the home buying market. For this reason, you may make some common mistakes and this may prove dangerous for you in the future. Look at the tips below that’ll help you avoid the common mistakes in life:

1. Not knowing how much you can afford

This is very common that even after you decide on a house, you may not able to decide on how much you can afford. There are some very reliable and user-friendly calculators that calculate “how much you can afford” which are available on the Internet. These calculators will help you decide on the amount of payment you have to make on your house. You just have to insert your income and the expenses and you’ll get the figure that you can afford to pay.

2. Not taking credit into account

Credit report is one of the most important parts of your financial life. If your credit report is not good or your credit score is not good enough for you to take out any of the mortgage loans, you must take measured steps toward improving the report and the score will ultimately increase. Get to know the ways that’ll help you increase your credit score. Creditworthiness doesn’t come from paying your bills and credit cards regularly but even excess use of cards can negate your credit report.

3. Not shopping around

This is the most common mistake one makes. Shopping around for the best offers and loans can help you get benefits. Check out for the down payment offers that you get from the different financial establishments. You’ll also know the down payment options that you get in different mortgage loans such as, conventional loans, FHA loans, VA loans, etc. There are some government loans that offer very low down payment options.

4. Not choosing your payment schedules

This is also an option that many of the first time home buyers don’t know. You can choose your own mortgage payment schedules. If you pay back your mortgage as fast as possible, you’ll be able to save a lot of money in interests whereas, if you amortize it for a longer period, you can reduce your monthly payments and also plan out your budget and payment plan accordingly. You can also save in the period of time as you pay.

5. Not considering closing costs

Apart from down payment and mortgage loans, you also need to focus on the closing costs, which is additional 1.5%. You need to pay for home inspection, lawyers fees, notary fees, moving costs, property insurance, etc. You must not forget about these costs when you’re getting a new house.

You must surely consider the points above when you’re taking out any of the mortgage loans whether conventional or federal. These points will also make you go through the home buying process smoothly.

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