5 common mistakes new homeowners make when buying a house

On Behalf of | Sep 21, 2022 | Real Estate

Owning your own home is a big part of the traditional American Dream. And it can be one of the wisest investments you ever make. But if you have never bought real estate before, you need to be careful. A mistake can lead to buying the wrong home for you and possibly even foreclosure.

Here are five mistakes many first-time homebuyers in the West Chester area make and how to avoid them.

Buying a home when you have pre-existing debt

If you have significant debt, such as a large credit card balance or medical bills, getting approved for a mortgage at a reasonable interest rate can be hard. Plus, without enough savings, you may be one emergency repair or job loss away from disaster. Instead, wait until you have your debt under control before you start shopping for properties.

Not having enough for a down payment

The less you can put up for the down payment generally means you will have less favorable mortgage terms, such as having to pay for private mortgage insurance. Saving up for a down payment of at least 10 percent can be a challenge and take years to accomplish, but it will help you buy a better home at better terms.

Not getting pre-approved for a mortgage

Technically, you do not need to get preapproval for a mortgage before you sign a purchase agreement. But it not only shows sellers that you are serious and speeds up the approval process. A preapproval letter lets you know how much you can expect to borrow.

Buying too much home for your income

On the other hand, it is usually a mistake to buy a home at the maximum indicated in the preapproval letter. For most people, the amount listed is more than they can actually afford. If you get stuck with a mortgage that exceeds your housing budget, you could soon be at serious risk of losing the home to foreclosure.

To avoid this, take stock of your income and expenses and how much you can afford on housing payments. As a rule of thumb, housing should not cost more than 25 percent of your household’s take-home pay.

Choosing the wrong type of mortgage for you

Lenders offer several types of mortgages. Some lock in a mortgage rate, while adjustable-rate mortgages are also an option. Also, you might assume that all mortgages have a 30-year term, but that is not true. You might also qualify for a 15-year mortgage. If you can afford the payments, a 15-year mortgage generally means you will spend significantly less in interest and build equity faster.

With the proper guidance, you can get through your first home purchase and begin your homeownership path on the right foot.

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