Buying a home – especially if it’s your first – can seem like it’s just a magnified version of any other major purchase. You’re the buyer, which makes you the boss. It can be as straightforward as that—but there are also several parts of the process where it’s all too easy for buyer mistakes to cost not just time and frustration, but real money, too. Here are some common home-buying missteps:
1. Looking for a home before speaking about a mortgage.
Many first-time buyers make the mistake of viewing homes before making contact with a mortgage lender. This puts you behind the ball if a home you love hits the market, or if you wind up spending time and energy looking at homes that you can’t afford. Being pre-approved for a mortgage at the top of what you feel comfortable that you can spend, can mean the difference between a lukewarm and enthusiastic seller response to your first offer.
2. Talking to only one lender.
Buyers who get a mortgage from the first (and only) lender or bank they talk to are potentially leaving thousands of dollars on the table. You may think that the bank where you currently do business will give you the best rate, but that may not be the case. The more research you do, the better basis for comparison you’ll have for ensuring you’ve landed the best mortgage configuration for you.
3. Being careless with credit.
In the months leading up to a mortgage application, don’t open new credit cards, close existing accounts, take out new loans, or make large purchases on existing credit accounts. And obviously, pay all bills on time. Maintain that practice through closing day.
4. Assuming you need 20% down payment
Delaying your home purchase while you save up for a 20% down payment can take years. That’s tying up cash at a time when you might be putting it to better use: maximizing your retirement savings, building an emergency fund, or paying down higher-interest debt. Today it might be possible to arrange a conventional mortgage for as little as 3% down. Even though that would require mortgage insurance, given today’s bargain mortgage interest rates, the result can make for a sensible bargain.