If you are considering taking advantage of historically low interest rates and getting a mortgage on a new (or new to you) home, there are four common mistakes most homebuyers make that can be easily avoided, with a little – excuse the pun – homework. Here are a few tips to help guide you down the path to home ownership.
1. Get your credit score
A vast majority of home buyers don’t know what their credit says about them, they just want to go shopping. This is a bad idea. Most lenders require a minimum FICO score of 620 or higher before even considering you for a mortgage. Thankfully, you don’t have to pay to play. Everyone is entitled to one free copy of all three credit reports per year using the Annual Credit Report website. For a quicker, easier way to get just a free idea of what your score is, try Credit Karma, as well as obtain helpful advice on improving your score, if need be.
2. Financing something prior to closing
Typically, most buyers don’t think about making purchases on credit, they just do it. Sadly, this can lead to your losing your dream home while in the mortgage application process. No matter how appealing that new boat, car or even credit card may seem, once you apply for a mortgage, it is imperative that you do not put anything on credit for any reason, or you could be putting your dream of homeownership in jeopardy. Your credit report needs to be an identical snapshot from the day you apply for your mortgage until closing day.
3. Not getting a home inspection
There are some homebuyers who will forego the expert opinion of a licensed home inspector, believing a house is in good condition or being sold “as is”. This is a bad move. Even in a brand new home, a new homebuyer needs to get an inspection to protect themselves from repairs not visible to the naked eye. Don’t skimp on this item in order to save a couple of bucks.
4. Not budgeting for taxes and insurance
With most mortgages, the payment you see on most websites can be misleading, as they do not account for escrow expenses such as property taxes or homeowner’s insurance; items usually adding at least a few hundred dollars to your monthly bill. Before home shopping, speaking with a loan officer and determining your true buying power should be your number one priority. From there, a professional real estate agent can estimate the properties that most closely fit your criteria and buying power – and buyer representation is free.
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