Ask homeowners what they wish they'd done differently when buying their house, and they all have an answer.
- I wish I'd known about noise coming from the nearby airport.
- I shouldn't have fallen in love with the loft without also paying attention to the out-of-date appliances.
- We should have saved some money for furniture.
- How can I stop paying private mortgage insurance?
The point is, everyone makes mistakes. Major purchases include variables that can lead to second-guessing. Take these suggestions to heart and perhaps you'll be better prepared when it comes to buying a home.
1. Be sure you are pre-approved
If you've searched for the perfect home that fits your price range, you may think it's just a matter of time before you're unpacking. This daydream could come to a screeching halt if you haven't been pre-approved. Sellers are wary of potential buyers who haven't been approved for a loan, so take necessary steps before you get too serious about home shopping.
2. Watch your credit
A frequent mistake of first-time home buyers is that they don't understand the relationship between their past and their future. That is, they don't realize the impact their credit history has during the mortgage application process. If you are considering a home purchase, the time is now to get a handle on your credit rating. Avoid big purchases that would have you borrowing money for at least a year before you apply for a mortgage. No car loans or new credit cards, for example, but don't cancel cards that are paid off either. Pay your bills on time, all the time.
3. Take advantage of expert advice
More and more home buyers rely too heavily on the Internet for home shopping and mortgage applications. With so many resources available, it's easy to overlook the value of consulting with experienced professionals who understand the ins and outs of buying your first home.
You may uncover some facts about the neighborhood online, but real estate agents know their market and can clue you in about intangibles like school districts, neighborhood resale value and more. Just as you may not be sure what type of house to buy, you may not know what type of loan is best for you. Fixed interest rate or adjustable? Which is best over the life of your loan? Does how long you'll own the home make a difference? Rely on your loan officer to help you answer these and other questions.
4. FHA loans aren't the only option
First-time home buyers with little cash for a down payment may think their main source for mortgage funding is the government-backed FHA loan. While it is a viable option, certain fees associated with FHA loans can make them more expensive than other mortgage loans. Check with other lenders for alternatives to the FHA. For instance, Thrivent Federal Credit Union offers mortgage loans with a down payment as low as 3 percent. And unlike with an FHA, you do not need to refinance your loan to remove private mortgage insurance (PMI) when equity in the home reaches the 20% threshold.
5. Prepare for the cost of ownership
Many first-time home buyers put every penny they've got toward the purchase without factoring the expenses that come with owning a home. It's not uncommon, in fact, to stretch beyond what you can actually afford, and then fall behind financially at what is supposed to be an exciting time in your life. If at all possible, leave some money in a savings account so it's ready for those unforeseen expenses and normal upkeep. Then add money to the account regularly for ongoing maintenance.
6. Think like a seller
It may seem hard to believe, but you won't live in your first home forever. Typical first-time home buyers move after about 11 years, according to the National Association of Home Builders. That's why it's smart to look at potential homes with one eye on their resale value. Scrutinize the neighborhood, paying attention to things like traffic patterns at different times of the day and proximity to schools, parks and shopping centers. Ask your real estate agent about housing trends. How many bedrooms, garage stalls and bathrooms make a home more appealing?