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The Do’s and Don’ts When Buying a Home for the First Time

Purchasing your first home and taking out a mortgage option is perhaps the biggest investment you have made in your life thus far – and you don’t want to mess it up. But getting caught up in finding the perfect home and dreaming about what life would look like in it is so easy. This leads to many costly mistakes, and you’ll wish that you followed the typical do’s and don’ts when buying a home for the first time.

Do’s and Don’ts When Buying a Home

To help you successfully get those keys in hand at the closing, here are a few do’s and don’ts you should follow, especially if you’re new to the home buying market.

1. DO Get Approved For a Mortgage Before You Make an Offer

The market in many areas is still really busy, with many sellers getting multiple offers. So, without a pre-approval, you are too great of a risk for the seller. There is no guarantee that you will be given a chance – especially if there are other offers from either cash buyers or those who have been pre-approved by a lender.

Apply for your mortgage before you make an offer to get the best chance of securing your new home.

2. DON’T Apply With Just One Lender

There are so many lenders and mortgage experts out there, and they don’t all offer you the same thing. Just as you wouldn’t likely run out and buy a car without shopping around, you shouldn’t do that with a mortgage – which is an even greater investment.

Look into what different lenders have to offer and, for those that look ideal, apply with them. Never settle for just one.

3. DO Work with a Mortgage Consultant

Applying for a mortgage can be a time-consuming project, especially gathering all the specific loan process documentation required. And since you don’t want to apply with just one lender, going through this process over and over can be tedious and rather exhausting. The worst part is that you never know whether the lender is likely to approve you, what their rates tend to be, and so forth.

You can make your life so much easier when you work with a mortgage consultant. This is a great way to have access to those who have extensive knowledge in the field and a network of potential lenders. Based on your circumstances, they can help you determine the best loan programs and/or lenders to meet your needs – without wasting your time.

4. DON’T Spend Every Penny

The more money you have for a down payment, the smaller the mortgage you will need to take out. Unfortunately, coming up with a large sum down payment can be challenging. Many first-time homebuyers try to take everything they have and add it to this payment, leaving them with absolutely no emergency fund. As helpful as a large down payment may be, becoming this vulnerable can be dangerous.

Your down payment should be about 20% when buying a new home, but it doesn’t have to be. Depending on the loan programs you qualify for, you may find something that will allow you to purchase with no money down or even less than 5% down.

Save the money you can for your down payment without allowing yourself to go into debt – and without eating up everything you have. If you can come up with a large down payment, fantastic. If you need to find a loan program that allows much less, then that is ok, too. You don’t want to kick off life in your new home without having anything extra set aside.

5. DO Take Care of Your Credit

Speaking of not going into debt, your credit is incredibly important to lenders. You need to ensure that your credit is intact and in a good range before you try to buy a house. Many lenders have certain minimum requirements for the credit score and debt-to-income ratio in order to be approved for a mortgage.

Check your credit report to get an idea of where you currently stand. You can reach out to the major credit reporting agencies directly, such as TransUnionExperian, or Equifax. Or, you can use a credit report service to get an idea of your standing. Checking your own score like this will not impact your credit.

Keep an eye out for any negative account information, like late or missed payments. This can have a negative impact. Anything that is older than seven years old, accounts you do not recognize, those that have been listed more than once, and the like need to be addressed.

Take steps to clear up your credit report in order to help boost your score and better your chances of getting approved for a loan.

6. DON’T Apply For Credit Before the Loan Funds

Before your loan has been funded is not the time to apply for credit. That means don’t try to open a line of credit, apply for credit cards, buy a car or a boat, etc., after you have received a pre-approval and before the transaction is finalized and closed. This needs to be a dormant period for your credit because you don’t want anything to change unless it is for the better.

See, your lender approved your loan based on your credit score and your debt-to-income ratio. Anytime you apply for credit, your score will drop a couple of points, and your ratio can increase. Before the closing, your lender will re-run your credit to confirm everything is still good. Any new changes could increase your rate or even cost you the mortgage.

7. DO Stick to What You Can Afford

Who doesn’t want a huge, beautiful house with all the perks and luxurious add-ons? Everyone has a price range that they can comfortably afford – and that is the range in which you need to stick to when you buy a house.

Since there is no reason why you should get your hopes up for a house you can’t afford, it is important to have an idea of what can fit into your budget. And, if possible, focus on the lower end of that range. Using a mortgage calculator can help you to determine just how much home you can afford.

Take Your Time

When it comes to buying a home for the first time, it is important that you don’t rush into things but rather take your time. There are many do’s and don’ts when buying a home that you will want to follow so that the entire process flows as smoothly as you envisioned it.

Visit Option Funding Inc in Westlake Village for more information about home loan options, mortgages, and homebuying tips.