Becoming a homeowner is an attractive idea, and offers several advantages over renting. However, purchasing a house for the first time can be extremely overwhelming, and first-time homebuyers often get swept up in the ordeal and make several common mistakes.
Not Performing a Credit Check
Your credit score plays a big role in buying a home. Lenders look at your credit score to determine your “credit worthiness,” or how big of a risk you’ll be and how likely it is that you’ll pay down your debt. The higher your credit score is, the better a loan you’ll get; the lower your score is, the less likely it is that you’ll get a favorable loan, and the more likely it is that you’ll have to pay a higher interest rate.
Many first-time buyers do not check their credit scores, either because they don’t think they matter or because they don’t think there’s anything they can do about them. In reality, there are a number of things you can do to improve your credit score, like paying bills on time and paying down debt.
Additionally, research has found that the majority of credit scores contain false information: according to a study conducted by consumer group PIRG, 79% of credit reports contain some wrong information, and 1 in 4 reports contain errors damaging enough to deny consumers a favorable loan. By checking your credit score you can identify these errors and have them removed before you apply for a loan.
Falling in Love with a House You Can’t Afford
It’s easy to fall in love with the new construction house, with its hardwood floors, stainless steel appliances, tall ceilings, and gorgeous outdoor space. But if you can’t afford this house, you’re only hurting yourself, and setting yourself up for disappointment when you start looking at houses that are in your price range. Before you start looking at houses, you should get pre-approved for a loan, so you know exactly what you can afford, Once you do start looking around, you should only view houses in your price range.
Not Checking Out the Neighborhood
First-time buyers often fall in love with houses and forget about another crucial factor: the neighborhood. Where you’re living is just as important as what you’re living in, so you should do detailed research regarding the area, including visiting the neighborhood at different times of the day and week and talking to neighbors. Additionally, obtaining a property report can give you insight into the neighborhood, like what the crime rates are, what foreclosure activity has taken place within the community recently, and what the demographics of the area are.
Being Too Picky
It’s easy to daydream about the perfect house with all-upgraded fixtures, but it’s difficult to actually obtain this house on a first-time buyer’s limited budget. Buyers should come up with a few non-negotiable items, but they need to know where to bend them. There’s no such thing as a perfect house, it’s all about compromise. The majority of the upgrades can be done with time.