11 first-time homebuyer mistakes to avoid

Young couple starting loan process with mortgage professional

When shopping for a new home, many buyers make the mistake of focusing too much on price. While price is important, it’s only one element of buying a new home. Disregarding your credit report, thinking short term, and ignoring affordable lending options can cost you as much or more than paying too much for a house. As you start your search, buy your new home with confidence when you avoid these eleven common first-time homebuyer mistakes.

  1. Disregarding your credit report

Lenders use your credit report and subsequent score to calculate your interest rate. Also, the higher your score, the less of a risk you pose to a lender, and therefore the more likely they’ll be to approve you for a loan. Consequently, it pays to make sure that it’s accurate. From identity theft to clerical errors in reporting, mistakes on your credit report can cost you. Check your report for inaccuracies and correct them before you pre-qualify.

  1. Shopping for a home before pre-qualifying

In many markets, highly desirable areas multiple buyers may be looking at the same homes as you. If you hesitate, you may very well lose out on the ideal home for your family. What’s one of the most common first-time homebuyer mistakes to avoid? Beginning the process of viewing homes when you aren’t really ready to buy. Being prepared means that you’ve taken the essential step of pre-qualifying. This step is vital because it will tell you if you’re financially ready for homeownership as well as the maximum amount you can afford. Use the Guild pre-qualification calculator for detailed estimates of the home purchase price and loan amount that you can afford along with the required down payment amount.

  1. Hiring the wrong real estate agent

To ensure that you hire the buyer’s agent that’s right for you, start by asking people you know for local realtor recommendations. Once you have several candidates, consider interviewing them before deciding on which one to hire. To determine their background and experience, ask questions like, “Do you have a neighborhood or town where you do the most business?” and “What will you do to help me find a home?” Also, don’t discount the importance of a personality fit along with experience.

  1. Thinking short term

You love the house, and you can deal with the small bedrooms, one bathroom and laundry room in the garage, but will the next set of buyers? If you are planning on selling your home in the next few years, make sure the home fits more than just your family’s needs. By researching the top amenities and features of homes with good resale value before you buy, your home will sell more quickly when the time comes.

  1. Buying more house than you can afford

Just because you qualified, doesn’t mean you should take the maximum loan amount. We recommend that your monthly payment be no more than one-third of your monthly income. If your housing expenses are a larger percentage of your monthly budget, you may find yourself without enough money to cover your expenses. Get a better sense of what amount you’ll be comfortable paying monthly by using an affordability calculator.

  1. Disrespecting the seller

You may view a lowball offer as a starting point, but a seller may see it as an insult and refuse to answer your offer. We all want to buy a home for the best bargain price possible, but if you want the seller to take your offer seriously, be reasonable with your starting bid.

  1. Being afraid to ask your lender questions

To find the right loan for your family, start the mortgage loan process by getting information to compare your lender’s available mortgage programs. It’s essential to understand exactly what your mortgage will entail, so feel free to ask the questions that come to mind. Ask about down payment requirements and down payment assistance programs. Lastly, find out about current mortgage interest rates.

  1. Ignoring affordable lending programs

FHA loans, VA loans and USDA loans are just a few of the low or no down payment mortgage programs that make homebuying more affordable. If you’re aspiring to own a home within your budget and affordable lending program may be right for you. Educate yourself on the facts about the six low or no down payment mortgage programs that make homebuying more affordable and offer a variety of benefits for borrowers who qualify.

  1. Forgetting to ask about first-time homebuyer programs

When researching lenders, ask what affordable lending programs they offer for first-time homebuyers who need a boost. For example, Guild’s 3-2-1 Home is an exclusive first-time homebuyer program with unique benefits and advantages. You bring a 3% down payment and Guild provides a $2,000 The Home Depot Gift Card® and a $1,500 grant toward closing.*

  1. Depleting your savings

Typically, the more you put down on a home, the lower your mortgage interest rate will be. However, you don’t want to wipe out your savings and lose the safety net it provides. All homes require some level of ongoing upkeep. Be sure to leave cash on hand for inevitable repairs or maintenance.

  1. Overlooking closing costs

Also referred to as settlement costs, closing costs are expenses that the buyer pays over and above the price of the property. Make sure you include these in your budget, so you’re prepared to pay them when you close your home. Most realtors and financial advisors tell you that closing costs will typically be in the range of 2-5% of the home value. For a more accurate estimate of how much money will be needed, check out Guild’s handy Cash-to-Close Calculator.

Do you still have questions about how to avoid first-time homebuyer mistakes? Guild is here to help. Connect with an experienced loan officer to guide you through the home loan process.

*Guild Mortgage is not affiliated with The Home Depot. The Home Depot is not a sponsor of this promotion. The Home Depot is a registered trademark of Home Depot Product Authority, LLC. All rights reserved. Not available in Nevada. For eligibility and full terms and conditions, visit www.guildmortgage.com/321home/

The above information is for educational purposes only. All information, loan programs and interest rates are subject to change without notice. All loans subject to underwriter approval. Terms and conditions apply.