Most Americans dream of owning their own home. This is an innate desire that many of us nourish. Even after witnessing the 2008 housing industry crash that led to millions of foreclosed homes, the big American Dream lives on. Owning one’s own home is a deeply emotional matter and everyone deserves to see this dream turn into a reality.
The journey to home ownership may be a very emotional one, but it is full of financial implications as well. A lot is at stake apart from one’s emotions and finances, especially for those who have decided to buy their first home, the process can be very challenging.
Getting a mortgage loan for your first home is not easy. It can be complicated and time consuming, and is one of the most important steps towards the dream of ownership. Ample planning and preparing beforehand can make the process much smoother and faster. Let us see some of the common mistakes that first-time homebuyers end up making.
Overlooking the credit scores
Before applying for a home mortgage loan, check your credit scores. A low credit score can hit your mortgage interest rate, or worst, keep you away from the loan itself! Take steps to improve your credit score at least 6-8 months before you start looking for a home loan.
A new credit along with the mortgage
During the mortgage-application process, avoid taking out any additional credit such as an auto loan or a new credit card. It would increase your liability and lessen your eligibility for a mortgage loan. Even the most affordable home mortgage loans will be hard to fulfill if your liabilities keep on increasing.
Not weighing the total housing payment
It is important to factor in expenses such as principal, interest, taxes and insurance into a mortgage payment. All these expenses must be included while estimating the total housing cost.
Not getting your assets seasoned
Lenders as well as banks want to be reassured that borrowers can make regular monthly payments. Unless your bank statements show that you have had sufficient money in your account for months, they might not be convinced.
A steady income from stable employment is another key to obtaining a home mortgage loan. Underwriters check if you have a stable income and job. Avoid job-hopping before applying for a loan. A career change should be out of the question.
Not getting pre-approved
Before applying for a home mortgage loan, make sure you are pre-approved for one. This is like a written commitment from the lenders that will tell the sellers that you are serious about buying a home.
Not looking for lending options
Shop around and check for lenders that offer the best and most affordable home mortgage loan to you. Comparison-shopping is the key to the best mortgage rate.
Not understanding your loan documents
Last but not least, it is the borrower’s responsibility to read and understand the terms and conditions in the loan document. It may be time consuming, but it’s better than signing up for something you do not agree to.
Avoiding the above mistakes can make your journey to home ownership much smoother and hassle free. Additionally, partnering with professional lenders can help first time home-buyers a lot.