Buying your first home can be both an exciting and daunting experience. There are many steps to take to ensure the transaction for one of the biggest purchases you’ll make goes smoothly. First-time home buyers sometimes make a few missteps, such as not checking your credit score or talking to only one mortgage lender. Below is a brief guide to helping you avoid mistakes while buying your first home.
Not Checking Your Credit Score. Lining up your finances is key before moving forward to purchase your home. One of the first steps is checking your credit report and learning 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. Attending open houses or touring homes can be challenging if you do not know how much you can afford. You’ll 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 to find a home that works for you, talk to a mortgage lender. A lender will help you determine what type of mortgage you qualify for and your interest rate.
Only Connecting with One Mortgage Lender. First-time home buyers that avoid 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 Only on Putting Down 20 Percent. The longstanding first-time home buyer myth is that you need a 20-percent downpayment to purchase a home. There are several loan programs and options available to 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.
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