Last Updated on January 2, 2024 by Kari-Ann Ryan
Signing on the dotted line for a beautiful dream home is an exhilarating experience for first-time home buyers. While exciting, the event can be fraught with mortgage and credit mistakes. First-time home buyers should be aware of these 10 common pitfalls and how to avoid them.
What are common mistakes in first-time home buying?
Mistakes in the homebuying process can be difficult for first-time home buyers to see. Many errors are minor and do not pose huge problems. On the other hand, some can be disastrous and lead to processing delays and financial roadblocks in the future.
Mistake 1: Not getting preapproved:
Sellers are more likely to consider buyers who approach them with a preapproval. Besides being taken seriously in bidding wars, a preapproval offers other important benefits, like giving the buyer a clear indication of how much home they can realistically afford.
An initial approval through a mortgage lender verifies credit, income, and assets. It prevents buyers from setting their sights on a higher home price than they can afford. While the initial approval doesn’t promise a mortgage, it can help buyers make a strong offer to sellers.
Mistake 2: Failing to check credit score:
Credit issues, like missed payments, significant debt, or actions taken by debt collectors, can stop mortgage lenders from offering their best terms or outrightly declining the loan application. A low credit score, such as below 620, may make it difficult to get a conventional mortgage.
Lenders check credit scores during their initial approval but will recheck it just prior to closing day. Any changes to a credit report, such as those caused by opening new credit cards or failing to pay existing credit cards on time, can lead to difficulty qualifying for financing.
First-time home buyers are advised to check their credit score prior to beginning their search for a new home. Request a report from the three credit reporting agencies (Equifax, Transunion, and Experian) through AnnualCreditReport.com, look for errors, and dispute any mistakes.
Mistake 3: Not saving enough money:
Buying a home comes with considerable financial costs, including the down payment, closing costs, homeowner’s insurance, property taxes, and home maintenance. Besides the property, utility bills, moving costs, and homeowner’s association fees are additional expenditures buyers need to save for.
The standard amount for a down payment in years prior used to be 20 percent, an unattainable percentage for first-time home buyers. But some loans today, like VA loans, require as low as 0 percent down. The average down payment on a home is 6 percent.
Mistake 4: Overlooking government-backed loans:
Government-backed mortgage programs offer down payment assistance to first-time home buyers who are stymied by financial challenges. USDA loans, VA loans, and FHA loans offer competitive interest rates and help buyers make a down payment of zero or as little as 3.5 percent.
Mistake 5: Failing to assess the neighborhood:
While a brand-new home can be a dream, it feels less enjoyable if the neighborhood is less than ideal. First-time home buyers should check the area’s crime rate, quality of schools, and proximity to a workplace if these aspects are important to them.
Mistake 6: Not hiring a real estate agent:
A professional real estate agent helps a first-time home buyer negotiate with sellers. If a buyer walks into a showing without one, the seller’s agent may offer representation with the intent to obtain the highest offer for the seller. Buyers should hire an agent whose interests are aligned with theirs.
Mistake 7: Switching jobs:
Changing jobs after a mortgage is approved based on a specific income can delay closings. Lenders approve individuals who show stable income and employment over two consecutive years. When possible, switch jobs after the loan closes; otherwise, immediately inform the lender of the change.
Mistake 8: Neglecting to change the locks:
Well before moving possessions into the new home, change the locks. Even when the previous homeowners seem honest, it’s never clear how many people they’ve given spare keys to. Also change the codes on the keypad opener on the garage door.
Mistake 9: Skipping a home inspection:
A home inspection is intended to protect the buyer in the event that major issues arise. Waiving the inspection can leave the buyer financially responsible for problems, like water damage, that develop after closing. Include a home inspection contingency when making an offer.
Mistake 10: Not following up on a home inspection:
The seller may have resolved issues with the home after a home inspection. If not, prioritize making repairs based on safety (such as electrical issues) and functionality (such as the furnace). Buyers with ample time before they move in can hire contractors to make fixes in the empty house.
Becoming aware of common mistakes can help first-time home buyers avoid them. But home buyers never make a mistake when they hire Mid-West Moving & Storage for their upcoming move. Our residential moving services are trusted by countless satisfied Chicago customers.
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We take care to protect your home at both the origin and destination. Our movers use floor runners, railing covers, carpet shields, and furniture padding to prevent nicks and scratches. Specialists can also create a detailed floor plan for the placement of furniture and appliances in your new home.
As a local professional mover, we offer numerous additional conveniences, such as packing and unpacking services, short- and long-term storage, and regular communication to keep you updated throughout your move. We take care of every aspect of the move to ensure its success.
When quality moving services at an affordable price are important to you, Mid-West Moving & Storage is the solution. Even when unexpected challenges arise, our experienced crews tackle them with ease.
Call our Chicago, Illinois, location today at 847.593.7201 or fill out a form online and request your free moving quote.