So, you’ve finally decided to buy your first house. While this could be the wisest investment you’ll ever make, it could be the costliest if you don’t tread carefully.
It could be because of the following mortgage mistakes that first-time home buyers make. Understand these mistakes, so you can make a more informed decision when taking out a mortgage for your home.
Scrimping on the Down Payment
While this seems appealing at first, paying a down payment lower than 20% of your home’s value would require you to also take out a PMI or private mortgage insurance along with your mortgage, which would in turn increase your interest and therefore, monthly payments, explains a top mortgage lender in Morristown, TN. In case the value of your house decreases, you might end up owing more to your lender than what your home is worth.
Buying a Home You Can’t Comfortably Afford
Most financial experts recommend that you spend no more than 30% of your gross monthly income on a house, considering you also need to pay for insurance and taxes. However, the amount you could afford should be mainly based on your financial circumstances, so do the math.
Skipping Mortgage Pre-approval Before Shopping for Houses
The biggest advantage of getting pre-approved for a mortgage is that you would know exactly how much you could afford to spend on a house. Being pre-approved would also communicate to sellers that you have the means to make good on your offer if you end up in a bidding war on a home you really love.
Going for the First Mortgage Deal Offered to You
You might be pleasantly surprised that there’s a broad range of mortgage options available; you just need to find the right lender. Different mortgage lenders look at different factors when evaluating your worthiness, as well as your financial circumstances. Depending on the lender you choose, you might be offered substantially different interest rates and loan terms.
Your first home buying experience isn’t something that you should take lightly. Getting the right mortgage deal is key, and this would require thorough research and patience on your part so that you could secure the best possible deal. By avoiding the common mortgage pitfalls listed above, you’d be in the best position to make a more informed decision when it comes to your dream house.