5 Expenses Homeowners Pay That Renters Don’t

Thinking about buying? Be sure to include these five items in your calculations.

Homeownership may be a goal for some, but it’s not the right fit for many.

Renters account for 37 percent of all households in America — or just over 43.7 million homes, up more than 6.9 million since 2005. Even still, more than half of millennial and Gen Z renters consider buying, with 18 percent seriously considering it.

Both lifestyles afford their fair share of pros and cons. So before you meet with a real estate agent, consider these five costs homeowners pay that renters don’t — they could make you reconsider buying altogether.

1. Property taxes

As long as you own a home, you’ll pay property taxes. The typical U.S. homeowner pays $2,110 per year in property taxes, meaning they’re a significant — and ongoing — chunk of your budget.

Factor this expense into the equation from the get-go to avoid surprises down the road. The property tax rates vary among states, so try a mortgage calculator to estimate costs in your area.

2. Homeowners insurance

Homeowners insurance protects you against losses and damage to your home caused by perils such as fires, storms or burglary. It also covers legal costs if someone is injured in your home or on your property.

Homeowners insurance is almost always required in order to get a home loan. It costs an average of $35 per month for every $100,000 of your home’s value.

If you intend to purchase a condo, you’ll need a condo insurance policy — separate from traditional homeowner’s insurance — which costs an average of $100 to $400 a year.

3. Maintenance and repairs

Don’t forget about those small repairs that you won’t be calling your landlord about anymore. Notice a tear in your window screen? Can’t get your toilet to stop running? What about those burned out light bulbs in your hallway? You get the idea.

Maintenance costs can add an additional $3,021 to the typical U.S. homeowner’s annual bill. Of course, this amount increases as your home ages.

And don’t forget about repairs. Conventional water heaters last about a decade, with a new one costing you between $500 to $1,500 on average. Air conditioning units don’t typically last much longer than 15 years, and an asphalt shingle roof won’t serve you too well after 20 years.

4. HOA fees

Sure, that monthly mortgage payment seems affordable, but don’t forget to take homeowners association (HOA) fees into account.

On average, HOA fees cost anywhere from $200 to $400 per month. They usually fund perks like your fitness center, neighborhood landscaping, community pool and other common areas.

Such amenities are usually covered as a renter, but when you own your home, you’re paying for these luxuries on top of your mortgage payment.

5. Utilities

When you’re renting, it’s common for your apartment or landlord to cover some costs. When you own your home, you’re in charge of covering it all — water, electric, gas, internet and cable.

While many factors determine how much you’ll pay for utilities — like the size of your home and the climate you live in — the typical U.S. homeowner pays $2,953 in utility costs every year.

Ultimately, renting might be more cost-effective in the end, depending on your lifestyle, location and financial situation. As long as you crunch the numbers and factor in these costs, you’ll make the right choice for your needs.


Originally published August 18, 2015. Statistics updated July 2018.

Source: zillow.com

Temptations to Avoid When Searching for your Starter Home

Advice for First Time Home BuyersAdvice for First Time Home BuyersPicture this; you have a perfect image in your head of the home you are going to buy. It’s the first time you are buying a house and from the look of things, everything is going perfectly; you have narrowed down your search to a favorable neighborhood and made the necessary arrangement to own the home. Then you start noticing flaws that you could have avoided if only you had taken time to do things the right way.

This is a common story amongst most first time homeowners. To avoid falling into the same trap, here are temptations to avoid when searching for your starter home.

Not Hiring an Agent

Real estate agents are good at their job but they don’t come cheap. Instead of paying an agent, most first time homeowners decide to go it alone. The thinking here is that by foregoing the services of an agent, you can save a few bucks. You embark on open houses, hunting through one listing to the other.

This is usually a bad decision that puts many people at crossroads on which home to buy or how to bargain on a deal. Having an agent means that the leg work is reduced considerably, because not only do they have access to Multiple Listing Service (MLS) but they can also spot an overpriced home from a mile away.

Falling in Love at First Sight

When it comes to real estate, love, at first sight, is one temptation that can cost you dearly. Getting the right home requires due diligence. You should take it upon yourself to have the property inspected and appraised before you make a final decision. As a good measure, it’s advisable to at least view 5 houses to see how they compare.

Being unduly hasty to acquire the very first home that tweaks your interest can make you overlook important appraisal details. Information such as the actual market value of home, age of the home and its general condition could take time. Hurrying the process could mean waiving some of these key processes.

Relying on Your Family for Advice

The pride that comes with homeownership can cloud your judgment especially when it comes to getting advice. Family and friends can actually lead you into settling on the wrong home. This is because their advice is biased and will mostly reflect their own housing conditions.

As a first time homeowner, you may not be too choosy or hang-up on every small detail. This is not to say that you should skip the home inspection; however, there are some minute imperfections that you can deal with. Your family or friends may have an issue with such details and advise you against buying such a home.

What they don’t know is that you could have gone through several homes before you settled on that one they are trashing. It’s advisable to only heed the input of those members who have been with you through the entire process.

Waiting Too Long For the Market to Shift

The housing market fluctuates through buyers’ and sellers’ markets. The two shifts are a result of supply and demand. When the supply of desirable houses is low, prices shoot upwards favoring sellers; on the other hand, a surplus causes prices to tank, a situation that favors buyers. What’s the importance of this information for first-time buyers?

Here is why: A common piece of advice that you will get when looking to buy a house is that you should wait for the prices to come down. This is sound advice but how long is too long- how patient should you be?

It’s hard to give a clear answer on this. The best you can do is keep yourself updated on the housing market. Keep tabs on the Housing Market Index specific to your location. By watching these trends, you can (to a certain degree) know when prices are low enough for you to buy.

Final Take

While buying a house, most first time owners make mistakes by letting their emotions drive them. Temptations will make you approach a deal blindly; you go it alone or sideline your agent, settle on the first home that interests you, go with a family member’s advice or waiting too long for prices to fall. These temptations can lead you into making the wrong buy.

Source: creditabsolute.com

Who Owns the Home When Two Names are on the Mortgage?

We shed some light on buying a home as a couple so you’re not in the dark when it’s time to sign on the dotted lines.

When couples start a new journey as homeowners, questions can linger as to whose name (or names) should be listed on the mortgage and title. Many couples want a 50/50 split, indicating equal ownership to the asset, but sometimes that isn’t the best financial decision. Plus, with more than one person on the loan, the legalities of who owns the home can get tricky. A home is often the largest purchase a couple or an individual will make in their lifetime, so ownership can have big financial implications for the future.

Title vs. mortgage

For starters, it’s important to note the difference between a mortgage and a title. A property title and a mortgage are not interchangeable terms.

In short, a mortgage is an agreement to pay back the loan amount borrowed to buy a home. A title refers to the rights of ownership to the property. Many people assume that as a couple, both names are listed on both documents as 50/50 owners, but they don’t have to be. Listing both names might not make the most sense for you.

Making sense of mortgages

For many, mortgages are a staple of homeownership. According to the Zillow Group Consumer Housing Trends Report 2017, more than three-quarters (76 percent) of American households who bought a home last year obtained a mortgage to do so.

When a couple applies jointly for a mortgage, lenders don’t use an average of both borrowers’ FICO scores. Instead, each borrower has three FICO scores from the three credit-reporting agencies, and lenders review those scores to acquire the mid-value for each borrower. Then, lenders use the lower score for the joint loan application. This is perhaps the biggest downside of a joint mortgage if you have stronger credit than your co-borrower.

So, if you or your partner has poor credit, consider applying alone to keep that low score from driving your interest rate up. However, a single income could cause you to qualify for a lower amount on the loan.

Before committing to co-borrowing, think about doing some scenario evaluation with a lender to figure out which would make more financial sense for you and your family.

True ownership

If you decide only one name on the mortgage makes the most sense, but you’re concerned about your share of ownership of the home, don’t worry. Both names can be on the title of the home without being on the mortgage. Generally, it’s best to add a spouse or partner to the title of the home at the time of closing if you want to avoid extra steps and potential hassle. Your lender could refuse to allow you to add another person — many mortgages have a clause requiring a mortgage to be paid in full if you want to make changes. On the bright side, some lenders may waive it to add a family member.

In the event you opt for two names on the title and only one on the mortgage, both of you are owners.

The person who signed the mortgage, however, is the one obligated to pay off the loan. If you’re not on the mortgage, you aren’t held responsible by the lending institution for ensuring the loan is paid.

Not on mortgage or title

Not being on either the mortgage or the title can put you in quite the predicament regarding homeownership rights. Legally, you have no ownership of the home if you aren’t listed on the title. If things go sour with the relationship, you have no rights to the home or any equity.

To be safe, the general rule of homeownership comes down to whose names are listed on the title of the home, not the mortgage.

Photos courtesy of Shutterstock.


Source: zillow.com

What Do Mortgage Lenders Review on Bank Statements?

Know which financial weaknesses stand out to lenders so you can strengthen your chances of loan approval.

Trained to spot financial mismanagement, mortgage lenders take careful time to review your finances before approving or denying you for a home loan. The role of the lender in approving a loan is to make sure you have enough money for a down payment and closing costs, and to assess whether you’re able to regularly make your monthly payments. Part of how they do that is by reviewing your bank statements. That’s why it’s important to make sure all your documents and records are sorted and straightforward.

Bank statement warning signs

Overdraft charges
Lenders typically include your last two months of bank statements in their evaluation of your finances. Having a long list of overdraft charges in your account isn’t the best indicator that you’ll be a good borrower. No matter the circumstances, having a history of overdrafts or insufficient funds noted on your statement shows the lender that you might struggle at managing your finances.

Large deposits
Another red flag to lenders is when a bank statement has irregular or lump-sum deposits. This can be seen as iffy because it could appear that those funds are coming from an illegal or unacceptable source. Unless you can provide an acceptable explanation for your large deposit, it’s likely the lender will disregard those funds and apply your remaining dollars to their assessment of whether you qualify for a loan.

Signs of the bank of mom and dad
One way to help ensure that your bank statement won’t raise any red flags with lenders is by having consistent, tracked payments. If, for instance, you have automatic monthly payments to an individual rather than to a bank, lenders could see that as a non-disclosed credit account. This would be the case if you were to take out a loan from your parents and make car payments to them rather than an actual bank, for example.

How to reduce bank statement scrutiny

Take extra care of your transactions for at least a few months before applying for a mortgage. Lenders want to know that the money in your account has been there for some time, not just recently deposited. One or two big deposits into your account right before applying could indicate to lenders that the money you claim to have isn’t actually yours or isn’t a “seasoned” asset, meaning the money hasn’t been in your account for at least two months.

At the end of the day, it’s best to start the process of organizing your bank activity and statements prior to applying for a loan. When you start looking for a home, it’s best to have your financial information sorted in case your dream home hits the market and you have to move fast.

If you keep your bank statements top of mind in the initial search phases, you may have an easier time applying for a loan and ultimately securing it. Remember: Underwriters review your accounts once more, just prior to closing. So, be sure to maintain healthy finances throughout the closing process too.

Photos courtesy of Shutterstock.


Source: zillow.com

How Do Co-Borrowers’ Credit Scores Affect a Home Purchase?

Your partner’s credit history can influence your future interest rate.

Whether you’re a seasoned or first-time home buyer, be prepared to know your FICO score and have a firm understanding of your credit history. And if you’re buying with another person, their credit history can affect your joint home purchase.

What is a FICO score?

First things first — what’s a FICO score and why does it matter? FICO is an acronym for the Fair Isaac Corporation, the company that developed the most commonly used credit scoring system. Everyone is assigned a number ranging from 300 to 850. The number assesses your credit worthiness through previous payment history, current debt, length of credit history, types of credit and new credit. For the purpose of buying a home or obtaining a loan, it’s the score most commonly used by lenders to determine the borrower’s level of risk. Many people simply refer to the FICO score as “credit score,” so we’ll do that moving forward.

Which score do lenders look at?

Typically, your lender will look at three credit scores reported from each of the three credit bureaus — Experian, TransUnion and Equifax — and then take the median score of the three for your application. Borrowers should hope for at least a 680, which is generally the minimum score for getting approved for conventional loans. For borrowers with lower credit scores, FHA loans allow a 580 score, or even as low as 500 if a 10 percent down payment is made. In any case, the higher the score, the better interest rate you’ll be offered.

Should I apply with my spouse or alone?

Deciding whether or not to include a spouse or a co-borrower on a mortgage application often comes down to whether it makes the most financial sense.

There’s not a ton of wiggle room when it comes to qualifying for a loan. You typically qualify or you don’t. If the only way you can qualify for the loan is by applying jointly to include the total income of both borrowers, then that might be your only option. But even if your credit and income are good enough to qualify for a loan on your own, applying together still might be a better option, as each scenario has its tradeoffs.

My partner has bad credit

When applying jointly, lenders use the lowest credit score of the two borrowers. So, if your median score is a 780 but your partner’s is a 620, lenders will base interest rates off that lower score. This is when it might make more sense to apply on your own.

The downside in applying alone, however, limits you to just your income and not the combined amount from you and your partner. While your credit score might be better, having a lender evaluate you on only your income could lower the total loan amount you qualify for.

If having your name on the home is a big deal, don’t worry. You can still be on the title of the home, just not on the mortgage.

Photos courtesy of Shutterstock.


Source: zillow.com

How Many Credit Checks Before Closing on a Home?

Throughout the approval process, push yourself to maintain your credit while lenders pull it.

Navigating the purchase of a home can be overwhelming for first-time buyers. Lenders require documentation of seemingly every detail of your life before granting a loan. And of course, they will require a credit check.

A question many buyers have is whether a lender pulls your credit more than once during the purchase process. The answer is yes. Lenders pull borrowers’ credit in the beginning of the approval process, and then again just prior to closing.

Initial credit check for preapproval

In the first phase of acquiring a loan, pre-qualification, you’ll self-report financial information. Lenders want to know details such as your credit score, social security number, marital status, history of your residence, employment and income, account balances, debt payments and balances, confirmation of any foreclosures or bankruptcies in the last seven years and sourcing of a down payment. This is only a portion of the total information needed for your mortgage application.

Once you’re ready to get preapproved for a loan, lenders will verify your financial information. During this phase, lenders require documentation to confirm the information in your application and pull your credit history for the first time. You may be required to submit a letter of explanation for each credit inquiry in recent years, such as opening a new credit card, and for any derogatory information in your history, like a missed payment.

Once you find a home within budget and make an offer, additional or updated documentation may be required. Underwriters then analyze the risk of offering you a loan based on the information in your application, credit history and the property’s value.

Second credit check at closing

It can take time for your offer to be accepted, and for your loan to pass underwriting. During this period from the initial credit check to closing, new credit incidents may occur on your history. Many lenders pull borrowers’ credit a second time just prior to closing to verify your credit score remains the same, and therefore the risk to the lender hasn’t changed. If you were late on a payment and were sent to collections, it can affect your loan. Or, if you acquired any new loans or lines of credit and used those credit lines, your debt-to-income ratio would change, which can also affect your loan eligibility.

If the second credit check results match the first, closing should occur on schedule. If the new report is lower or concerning to the lender, you could lose the loan. Alternatively, the lender may send your application back through underwriting for a second review.

It’s important for buyers to be aware that most lenders run a final credit check before closing, so the home-buying window is a time to prudently mind your credit.


Source: zillow.com

The Mortgage Pre-approval Letter: What It Is and Why You Need One

“You should obtain a pre-approval as soon as you decide you’re ready to start looking at homes,” says Realtor Raven Reed of Raven Reed Realty. “Realtors will need this letter in order to be able to start showing you properties. Sellers don’t want to waste time cleaning and vacating their homes for buyers that aren’t qualified — so they require them.”
Getting a pre-approval letter is easier than you may think. The best way to start is by finding a lender you like and completing a mortgage application. You can find a mortgage lender through your real estate agent or local recommendations. Keep in mind that just because you get pre-approved doesn’t mean you have to go with that lender later. You can always shop around rates with multiple lenders.
“I have seen many people make silly financial decisions after getting a pre-approval letter that ultimately cost them a home purchase,” said Brittany Hovsepian, owner of The Expert Home Buyers. “Don’t go out adding a new car to your debt-to-income ratio after getting a pre-approval letter and think that isn’t going to come up during the underwriting process of home loan approval.

What is a Mortgage Pre-Approval Letter?

Your pre-approval letter is typically good for several months. Since the exact time frame can vary, it’s good to ask your mortgage lender how long your letter will be good for. Keep in mind that you should never approach a seller with an expired pre-approval letter, only a valid one.
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This is why it helps to have your pre-approval ready before you actually need it.
Once you approach a lender, you’ll be asked to provide some basic financial and contact information. This will include things like proof of income (or employment verification), bank statements and details on debts you’re paying. You’ll also need to have a home loan amount in mind. This is where knowing your home-buying budget is important. Assuming your ask is within reasonable limits based on your financial profile, pre-approval letters are often processed relatively quickly — typically within a few days.

Why You Need a Mortgage Pre-Approval Letter

If you’re about to start house hunting, it’s best to go into the process armed and ready. That includes lining up financing before you walk into your dream home.
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Pre-approval letters often result in a hard inquiry on your credit. This is noteworthy because these credit checks can sometimes lower your credit score. While they likely won’t lower it significantly, it’s good to limit the number of hard inquiries happening in a short time frame.

When to Get a Pre-Approval Letter

A mortgage pre-approval letter demonstrates that you have the financial means to buy a house, helping you stand out as a serious buyer.
Having your mortgage pre-approval letter before you make an offer on a home means knowing your budget ahead of time and contacting a lender once you begin your home search.
“Shopping outside of your budget can be detrimental to the process, and create unrealistic home expectations for your current financial situation,” says Reed. By getting your pre-approval out of the way early, you’ll be able to narrow down your home search to the houses you like that are within your price range.
Unlike mortgage pre-qualifications, pre-approval letters are official documents from a lender stating they’ve reviewed all of your financial information as a borrower and have approved you for a loan of a certain amount. The financial information they review will likely include things like your income, credit score and outstanding debts. Because this letter is only given once all of your financials have been verified, it means more than a simple pre-qualification.

How to Get a Pre-Approval Letter

Source: thepennyhoarder.com
Here’s what you need to know about how this document works in the homebuying process and how to get one.

Other Things to Keep in Mind About Getting Pre-Approved

One final word of caution about pre-approval letters: They’re not an absolute guarantee of getting a home loan.
“I see many first time home buyers make the mistake of getting pre-qualified and not pre-approved,” says Realtor Jason Gelios of It’s All About The Real Estate. “A pre-qualification is when a lender gets information from an applicant without actually verifying any of it — this is usually due to the applicant just sharing information verbally without documentation.”
“Long story short, when you are shopping for a home, your financial situation needs to remain relatively unchanged throughout the process or you will be putting loan approval status in jeopardy.”
Ready to stop worrying about money?
Another reason to get pre-approved for a mortgage early is that it gives you a better understanding of your home-buying budget. Without running the numbers on your projected down payment and monthly mortgage payments, it can be hard to fully understand how much house you can afford.
“A pre-approval letter is oftentimes the most overlooked step in the home buying process,” says Gelios. “One of the major benefits of having a pre-approval letter ready is that it saves time and allows an offer to be sent faster to the seller’s agent. It also shows that a home buyer is able to move forward with their offer, and this goes a long way when competing with other buyers in the market.”

While mortgage pre-qualification is an informal understanding between a lender and borrower, a pre-approval letter carries much more weight, especially when it comes to making a bid on your dream home.

Do You Qualify for Treasury Down Payment Assistance?

A home of your own could be within your reach.

It’s spring, and some renters’ thoughts may turn to home buying. Then reality hits: Between paying off student loans, paying rent, and keeping up with other bills, they haven’t saved for a down payment.

Renters cite down payments as one of the biggest roadblocks to homeownership. So, if you’re a low- to moderate-income home shopper in California, Florida, Rhode Island, Tennessee, or Kentucky, you’ll want to pay close attention. These states (and a few others) have Hardest Hit Fund (HHF) money available from the U.S. Department of the Treasury, which helps eligible buyers with down payment assistance (DPA).

Each state DPA program has income, credit score, occupancy, property value, and location requirements. But they share a common goal: revitalizing hard-hit communities.

“Our goal is to stabilize the neighborhoods and housing markets in Tennessee that have not recovered as fast as other areas across the state,” says Ralph M. Perrey, executive director of the Tennessee Housing Development Agency, which offers $15,000 in down payment assistance to draw home buyers to 55 ZIP codes across the state.

Innovative offerings

Housing agencies in 18 states and the District of Columbia have been administering HHF money since 2010. Participating states were chosen either because they struggled with unemployment rates at or above the national average, or they experienced home price declines greater than 20 percent since the housing market downturn.

In the beginning, programs focused on homeowners in some type of mortgage distress. “Now, to help these communities, we’ve developed programs for other issues we face,” says Cecka Rose Green, communications director at Florida Housing Finance Corporation.

Florida, California, Oregon, and Michigan have made HHF available to seniors who can’t pay property charges on their home equity conversion (reverse) mortgages. Illinois is now using HHF to help underwater homeowners refinance to more affordable loans. And several states have launched HHF DPA programs.

Florida’s $188.4-million HHF DPA program has assisted 7,481 first-time borrowers across 11 targeted counties. Borrowers can request up to $15,000 for down payment, closing cost, and prepaid assistance toward a home purchase.

“With the housing market improving, helping people buy homes is strengthening demand in hard-hit areas, stabilizing home prices, and preventing future foreclosures,” says Green.

“These agencies are being creative and resourceful in working with the Treasury to continue to serve their markets,” adds Mark Spates, a Fannie Mae director. Fannie Mae is the leading purchaser of loans underwritten by state housing agencies.

When the money runs out

States have until the end of 2020 to spend HHF money — but how they allocate funds varies from program to program.

The Arizona Department of Housing has a $76-million Pathway to Purchase DPA program, which has helped more than 2,600 buyers in 17 targeted cities.

But on March 29, 2017 — approximately 12 months after launch — Pathway to Purchase ran out of money, and the agency will not refund it. However, buyers can still apply for DPA from the state’s self-funded program, notes Dirk Swift, homeownership programs administrator for the Arizona Department of Housing.

Don’t wait!

California, Florida, Rhode Island, Tennessee, Kentucky, and a few other states still have HHF DPA money for renters hoping to buy — for now.

“We’re not in a situation where we’re about to run out of DPA funds,” advises Green. “But they’re going pretty fast.”

If you plan to purchase in an HHF state or want to learn more, contact your state housing finance agency, or visit the Hardest Hit Fund website to learn about local opportunities.

Looking for more information about mortgages? Check out our Mortgage Learning Center.

Top photo from Zillow listing


Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.

Source: zillow.com

10 First Time Home Buyer Mistakes To Avoid

Buying a home of your own may make good long-term financial sense, as it is usually cheaper to own than to rent in the long term. However, buying a place for the first time is not without its challenges and problems.

And if you don’t do your homework or your due diligence before buying your house, you may end up paying too much for the property, or buying a property with all kinds of problems.

In no particular order, here are 10 common first time home buyer mistakes and how to avoid them.

If you are interested in comparing the best mortgage rates through LendingTree click here. It’s completely free.

>> MORE: 5 Signs You’re Not Ready to Buy a House

First Time Home Buyer Mistakes To Avoid

1. Not knowing your credit score before you start the home-buying process.

A big factor in determining whether you’ll be qualified for a mortgage largely depends on your credit score. Obviously, the higher your credit score, the better is your chance to get pre-approved for a mortgage loan.

However, fist time home buyers often make the mistakes of completely ignoring their credit score.

So, before you start looking for a home, it makes sense to review your credit report to know where you stand. If you have a not so stellar credit score, take steps to improve it.

Related Resources

  • Get Pre-qualified for a Mortgage Online Now
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  • Check Your Credit Score For Free

Your credit report should be the first place to start. Your credit report will list all the “bad stuff” that you’ll need to work on. For example if you have too much credit card debts, try to pay them off.

Click here to get a free copy of your credit report.

2. Failure to research the neighborhood.

“One of the important aspects of buying a home is learning all you can about the neighborhood. Those who live there already are a great resource,” says Bill Gassett of Max Real Estate Exposure.

Indeed, the neighborhood might look “ok” to you during the day, but “bad” at night. There might be a bar at the corner where there is a lot of noise at a certain time of the night.

You might find later, after you purchase the house, that the neighborhood is ridden with crimes. This potential for surprise is why you must research.
So, never buy a home without thoroughly understanding the overall vibe of the neighborhood.

Related: Due Diligence for Home Buyers: What You Need to Check

3. Not seeking professional advice.

Buying a home is a major financial commitment. You’re taking a significant amount of money in the form of a loan to finance the property. Every month you’ll be required to pay a certain amount of mortgage. Plus, you may have other debts that you’re paying on a monthly basis, like a car loan, student loan, etc…

Therefore, it makes sense to speak with a financial advisor before you start the home buying process. A financial advisor can review your financial situations and help you determine whether buying a home can impact your finances.

Use this financial advisor matching tool to find financial advisors in your area.

4. Not getting pre-approved for a mortgage.

Many people, especially first time home buyers, start looking for homes before they even meet with a mortgage lender. They visit properties, find the right home, and fall in love with it. But they realize later that they will not get the place, either because they can’t afford it or because they don’t have a pre-approval letter.

Because you might be competing with other buyers shopping for the exact same house, it makes sense to speak with a mortgage lender about getting pre-approved for a home loan.

Plus, having a pre-approval letter tells the seller that you’re serious and you are able to finance the property.

>> MORE: Get Pre-approved for a Mortgage.

5. Overlooking foreclosure homes.

Many first time home buyers when they’re buying a place is usually to live in. However, situations may arise (whether it’s divorce or you’re moving to another state) where you have to sell your home. But why not make a profit along the way.

And one of the best ways to maximize your chances to earn a good profit if you do decide to sell your house is to buy the property at foreclosure. Properties in foreclosures are a better value than a conventional purchase. However, that doesn’t mean they’re not risky.

Foreclosed properties are sold ‘as is’ and some may therefore have serious defects. But if you’re willing to face the risks, and have extra cash to go towards repairs, you may earn a good return on your investment.

So because you never know what your situation may be in the future, you should not overlook foreclosure properties.

6. You only get one mortgage rate quote.

Some first time home buyers unfortunately make the mistake of working with only one mortgage lender. This is a big mistake that can cost you a significant amount of money over the life of your loan. In fact, mortgage rates vary from lender to lender.

So, when you shop around for several lenders, you have the opportunity to compare several and different rates. Thus, you get to choose the best rates, which could save you thousands in mortgage interests.

Click here to compare mortgage rates through LendingTree. It’s completely FREE.

7. Not taking advantage of FHA loan.

Gone are the days where you’re required to put 20% down payment on a house. Nowadays, you can make a down payment as low as 3.5% of the property purchase price, thanks to the Federal Housing Administration (FHA).

Now, it’s better if you have 20% down payment, as you can pay your loan faster and have more equity in your home. And also by putting 20% down payment, you can avoid paying private mortgage insurance. But the reality is that, not too many first-time home buyers can come up with all that cash.

In this case you should not overlook the FHA loan program. In fact, “FHA loans are pretty desirable for most home buyers, because of the favorable terms they offer, including small down payments, competitive interest rates and lower closing costs than standard mortgages,” says Gassett.

He explains that “you need to have a credit score of 580 or above to get the best terms of the loan, including a down payment as little as 3.5%.” If your credit is lower, he continues, “you will need a 10% down payment.”

>> MORE: How to Save for a Down Payment on a House

When you’re renting, you’re only paying the monthly rent. That’s it. However, as a home owner, you will be responsible when things need to be fixed, like changing a heater. And if you don’t have extra money saved up, you might find yourself in a hole.

So to avoid this mistake, try to save as much money as possible. This way, you can be prepared when emergencies present themselves.

9. Applying for new credit before closing on the house.

A first time home buyer might get pre-approved for a mortgage loan, and to learn later, just before closing, that they did not get the loan. Or that they found that the mortgage rate and fees they had received in the pre-approval letter are changed.

That usually occurs when those home buyers apply for new credit between the approval and closing period. Indeed, when you apply for new credit, it not only lowers your credit score (because a new inquiry is added), but it also increases your debt.

And mortgage lenders also based their decisions on your debt-to-income ratio. So, before you add on new credit accounts or loan, wait until after closing .

Click here to compare mortgage rates through LendingTree. It’s completely FREE.

10. Overlooking state and federal housing programs.

Another first time home buyer mistake is a failure to look into their local government agencies to see if they have any first time home buyer programs for which they might qualify. If you don’t look, you’re just leaving money on the table.

There are several first time home buyer programs designed specifically for first-time buyers. Depending on your state, these programs assist with down payment, repair costs, closing costs, etc… All you need to do is to check your city or state housing programs to see if you qualify.

In summary, being a first time home buyer is quite exciting. But it is an expensive and daunting process. Luckily, if you follow the tips and avoid the mistakes mentioned above, the process will be much smoother.

Working With The Right Financial Advisor.

You can talk to a financial advisor who can review your finances and help you reach your goals (whether it is paying off debt, investing, buying a house, planning for retirement, saving, etc). Find one who meets your needs with SmartAsset’s free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.

Related resources

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Source: growthrapidly.com