So, you’ve finally saved up enough to begin your first home search and to say your goodbyes to that landlord. First of all, congratulations! It’s quite an accomplishment to have reached the point where purchasing your first property is within your financial ability. Embarking on the home search journey is an exciting thing, and this excitement will make it pretty easy to fall in love with the homes you’ll meet during the process. It’s okay to harness that eagerness to sign your contract and to close the deal, but let’s slow down for a second. Buying a home is one of the best investments you can make and will undoubtedly help you in reaching your financial goals, but ignoring some of the minor (yet important) details of your home search could put you and your cash at risk. I’m glad you found this before closing on that first property, here are some of the most important and common mistakes we will avoid making during this process.
Ignoring your High Debt
Less than 23% of American’s are reportedly debt free, so one of the most overlooked pieces of the homebuying equation is taking account for your debt and DTI (debt-to-income ratio). One great thing about shopping for your new home, is that you also have the ability to shop around for your mortgage, but while you can go around to different lenders, having a high DTI can cause a lot of difficulty when trying to find a loan, let alone a decent rate. Many lenders want to see a 43% DTI at most, so if you’re sitting above that, it may be a better option to pay down your outstanding debt before continuing your search for a home and home loan.
Spending more than you can afford
The access we have to leverage when purchasing real estate makes the idea of buying a property that’s a bit nicer and a bit more expensive than you were budgeting for an attractive one. It’s understandable, especially for those who are applicable for those 3.5% and sometimes even 0% money down loans which make signing for an overly expensive home seemingly attainable. As a first-time homebuyer, you have to remember the additional costs that come with purchasing a property. HOA fees, property taxes, homeowners’ insurance, potential repair costs and more, all need to be taken into account before you decide on a property. As long as you run the numbers and understand what costs come throughout the homebuying process in relation to your budget, you’ll be good to go.
Skipping your Mortgage Pre-Approval
If you are shopping within a high demand market like the one, we operate in, we need to take every step possible to score a deal and to differentiate from other buyers. Having your mortgage pre-approved presents that you’re a legitimate buyer who can secure a mortgage. As a seller it’s much more appealing to spend time working with somebody who they are confident is serious about working a deal, and somebody who is going to rid them of the risk that they’re wasting time with a window-shopper. Going in with your mortgage pre-approved is a good bet in any situation.
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