Three Mistakes Every Home Buyer Should Avoid
Whether you're an experienced homeowner or a first-time home buyer, there are three common mistakes people tend to make when getting a mortgage:
1. Over-Extending Yourself
Many first-time home buyers make the mistake of getting too big a loan, justifying it by betting on a future increase in income. Perhaps you really want to get into that more expensive home. But while you may be certain to get that future raise, what you may not realize is that your expenses can go up substantially from renting an apartment to owning a home. One of the biggest expenses is the mortgage which may or may not be more than you paid in rent. Don't forget that you need to set aside money for property taxes and home insurance.
2. Not Improving Your Credit
One of the worst things you can do is to apply for a mortgage without checking to see how good your credit is first. You're entitled by law to receive one free copy of your credit report every 12 months, which you can obtain by visiting AnnualCreditReport.com. You should absolutely take advantage of this so that you can find possible errors which can be corrected or to find out what may be keeping your score lower than it should be. You may have too-high balances on certain accounts, delinquent accounts that must be cleared up, or accounts that may show up as still open even though they were closed. Give yourself time to clear up these issues. Your score may go up which may, in turn, qualify you for a lower interest rate and/or better loan program.
3. Not Planning for Every Expense
This mistake goes along with the over-extending yourself. Not all banks and lenders explain the entire process to their clients and some borrowers don't know what questions to ask. So because they are inexperienced, some home buyers may not know they need to have money to pay for the closing costs.
You need to be prepared to pay certain fees-the appraisal fee, home inspection fee, title insurance, points, and other lender fees. Make sure you check with your lender what fees you'll need to pay so you can come fully-prepared to the closing.
Don't forget that you may also need money to pay for certain home repairs, home maintenance, furniture, or even higher heating and cooling bills along with your other regular living expenses.
Even if you're an experienced home buyer, it's wise to remember not to make these mistakes when applying for a mortgage. Check your credit report, don't over-extend yourself, and ask your lender lots of questions so that you are completely prepared throughout the process as well as after.
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