Buying your first home can feel like summiting one of Colorado’s peaks, it can be both an exciting and daunting experience. It’s easy to get worn out along the way especially when it seems like there are so many steps to take before reaching the final destination. The lengthy process makes it easy for first-time homebuyers to make a few missteps, like not checking your credit score or only talking to one mortgage lender. Here are four mistakes to avoid when buying your first home.
Forgetting to Check Your Credit Score
Forgetting to check your credit score is like forgetting a water bottle, you might end up paying for it in the long run. Lining up your finances is key before moving forward on a home purchase. Check your credit report to learn your credit score. Your credit score is an important factor a lender uses in determining your interest rate on your mortgage loan. You have the right to a free copy of your credit report once a year from each of the three major credit reporting companies (visit annualcreditreport.com). Check for and correct any errors on your credit report to avoid potentially paying a higher interest rate on your loan.
Viewing Homes Before Knowing Your Price Range
Trying to tackle a 10-mile hike without being in shape isn’t a great idea. Sticking to hikes within your abilities causes a lot less pain and so does shopping for homes within your budget. Attending open houses or touring homes is risky if you don’t’ know how much you can afford. You risk falling in love with a dream home you may not be able to attain. Before online searching or driving around in your favorite neighborhood, talk to a mortgage lender. A lender will help you determine what type of mortgage you qualify for and your interest rate, so you get a specific idea of what you can afford comfortably.
Only Connecting with One Mortgage Lender
Finding your favorite hiking partner takes some trial and error. One friend might bring the best trail snacks while another brings great conversation. As a first-time homebuyer, you should shop around for the perfect lender. First-time homebuyers that skip comparing several different lenders could miss out on potential savings. When determining which mortgage lender is right for you, compare the different rates, lender fees and loan terms. Shopping around will help you figure out the lowest rate possible. According to a recent NerdWallet report, assuming a 30-year, fixed-rate $260,000 mortgage, a buyer could save $430 in interest in the first year alone by comparing five lenders before applying.
Focusing on Putting Down 20%
On most hikes there are usually a few routes to the destination and if you only focus on one you might miss something another route offers. One longstanding first-time homebuyer myth is that you need a 20% down payment to purchase a home. There are several loan programs and options available that allow buyers to move forward with putting down a smaller down payment. Determining how much you should put down is a personal decision based on your financial status.
Don’t let the homebuying process wear you down. For more information about purchasing your new home, contact NoCo HBA at (970) 686-2798.