Maybe you’ve just gotten married, or finally gotten that good-paying position you’ve worked so hard to achieve. Either way, you’re ready to buy your first home. This is truly an exciting time and one that should be savored. However, first-timers need to be extra careful not to make some all-too-common mistakes when shopping for that first home.
Mistake #1: You don’t know what you can afford
Whether you’re a couple living on two incomes or a single person making some serious money, how much you can borrow and how much you should borrow are two very different things. Mortgage qualifications can be tricky, and sometimes a person will qualify for a mortgage that they can’t realistically keep up with. Just ask the people who lost their homes when the housing bubble popped a few years ago to tell you just how disastrous it can be when this happens.
How much you should borrow will depend greatly on the kind of life you choose to live. If you’re the type of person who likes to stay at home and takes a thrifty approach to their expenses, then odds are you’ll be okay with a pricier mortgage. However, if you love the night life, spending money on things and experiences, like to travel, etc. then you may want to take a very close look at just how much of your monthly income is going to be eaten up by your house payment.
Mistake #2: Focusing too much on your mortgage
While your monthly mortgage payments will definitely be the longest running payments you’ll be making, they aren’t the only ones. Make sure you take into account the closing costs associating with home buying, as well as moving costs and any repairs you may need to make. You’ll want to leave several thousand dollars in your budget allocated to these costs.
Mistake #3: No down payment
Just because you can qualify for, and afford to keep up with, a mortgage doesn’t mean you’re ready to buy a house. If you can’t put down at least 20% of the closing cost as a down payment, then you’ll need to purchase private mortgage insurance. This will increase the cost of your monthly mortgage as well as the amount of money you’ll need to borrow to buy the house.
These mistakes are not meant to scare you, but to show you that buying a home can be more complicated than it seems. Provided you take the time to inform yourself of what you need to do, and where you need to be financially, buying your first home should remain the exciting experience it should be.