Spending more than How much you can afford
If you’re looking to buy a house, find out how much you can afford to pay each month. For many first-time homebuyers, the goal is to buy a house and get a loan with a reasonable monthly payment. Generally, your monthly mortgage payment should not exceed 28 percent of your monthly gross income. Make estimations based on your current income. To avoid spending more expenses, use a mortgage affordability calculator to see what price is affordable, and what is aggressive price range.
Not Prepare for Mortgage Process
Your lender evaluates your credit report and your debt-to-income ratio to determine whether you are qualified for a mortgage. As a first-time homebuyer, you may need to take some extra time to gather the documentation you need. You need to show your lender tax returns, pay stubs, and financial account reports, so make sure you have those documents prepared. Check your credit report to make sure there’s nothing unexpected in your financial profile. To simplify the qualification process and help you get the most reasonable terms on a loan, work to improve your credit score and debt-to-income ratio before you attempt to borrow.
Confusion about Preapproval
A preapproval is a good indication of what price range you may be eligible for. It’s important to note that getting this early stage approval does not guarantee your loan, but it can help the process and give an idea about whether or not there will likely still be financing available when filling out applications later on down the line.
Avoiding the Home Inspection
The home inspection is a great way to find out if there are any hidden problems with your potential new house before you buy it. If the place needs major renovations, an unnecessary repair or just regular maintenance then negotiating on price may be easier once these issues have been identified so don’t forget about this important step.
Not Budgeting about Closing Costs
Buying a house involves closing costs beyond the down payment, and they can be worthy of attention. Generally, closing costs total up to 3 to 5 percent of your purchase price of the home, so add this cost to your budget.
When you establish an escrow account with your lender, your monthly payments will include property taxes and insurance on top of your mortgage’s principal and interest. You may even find that your property taxes increase slightly after your closing based on your home’s price, which can make your monthly payment just a bit larger. It is important not only to calculate how much money will go towards these things but also to plan accordingly.