Buying a home can be intimidating to many, especially first-time homebuyers. When armed with the right information and some timely tips, you’ll be prepared to become a first-time homeowner. Here are the top 3 mistakes that first-time homebuyers make along with some seasoned advice.
Not Knowing Your Credit Score
Assuming that you plan to apply for a home loan in order to purchase your first home, your credit score is the most important number you will need to know before starting the home-buying process.
Your credit score is formally known as a Fair Issac Corporation Score – commonly called the FICO® Score. It ranges from 300 (very poor) to 850 (excellent). To learn more about what makes up a credit score, visit our post on what impacts a credit score here.
Not Getting Prequalified for a Home Loan
When you prequalify for a mortgage, the lender will calculate the approximate amount you will be able to borrow, based on the information you provide on your current income, assets, and debt during the last 2 years.
Keep in mind that the prequalification process is not an in-depth analysis of your financial situation. Prequalifying helps to save you time by providing you with a realistic price range you can afford. This way, you are able to manage your expectations and make appropriate decisions based on facts, not fantasy.
The biggest benefit of prequalification is that it gives you a specific dollar figure that you can use when searching for a home. Also, being prequalified provides you with an advantage over homebuyers who aren’t prequalified when multiple offers are made on a home. Be prepared with a prequalification letter.
Not Budgeting for Maintenance and Repairs
A major mistake that many first-time homebuyers make is that they underestimate the expenses that come with homeownership. Each month, you can count on having to make maintenance and repairs more often than not. Aside from minor expenses – such as lawn care and landscaping – there will be major costs such as paying for a new roof or having a new A/C unit installed.
You’ll also need to make purchases for your new home such as a lawnmower, washing machine and dryer, dishwasher, tools, etc.
A good way to be prepared for all of these expenses is to save about 2% of the home’s purchase price as a maintenance fund.