There are so many things to keep track of when finding and purchasing a home and many pitfalls to sidestep. This handy list can help you avoid some of the most common mistakes first time homebuyers make. (Hint: It has nothing to do with picking the wrong paint color or drawer pulls.)

  1. Budget reigns supreme. Realtors can help you with “location, location, location,” but when it comes to the home loan process, we want to help you focus on “budget, budget, budget.” Often, I have customers asking, “What loan amount do I qualify for?” I like to turn the tables and ask what they feel comfortable taking on for a monthly payment and work that number backwards from payment to loan amount. By backing into the monthly payment, we can comfortably get to the loan amount that considers all aspects of your payment like property taxes and insurances. 
  2. How much money do I have to put down. Another item to consider, as it relates to budget, is how much money do you have available to put down…and is it necessary to put as much money down as you initially considered.  What do I mean by that? Often-times first time home buyers think that they are required to put 20% down to buy a home and that just is not the case.  Maybe you want to save some of that money for a rainy day or hold some of that savings back to make immediate improvements to a particular home that just needs a few updates. This is an important part of the home buying conversation that you and your lender should have. 
  3. PMI Insurance. While it’s true that if you put less than 20% down on the purchase, PMI (private mortgage insurance) is required on the loan. While no one likes to have a PMI cost as part of their payment, it is a tool to get you into a home much sooner than it takes to save the 20%.  In addition, it may be a better option to have a small PMI payment vs feeling you have depleted all of your savings to get to the 20% threshold.  PMI can be much more affordable than one thinks and is absolutely worth this being part of our discussion. 
  4. Discuss options for first-time homebuyers. You may qualify for mortgage loans that you were not aware of. Most lender’s offer lower down payment options for first time home buyers as well as specific programs. For example, if you’re a veteran, there is a veteran-specific mortgage loan that offers no money down home loans. FHA insured mortgage loans can provide options for borrowers that may have had credit challenges in the past and Rural Development guaranteed mortgages are also a no money down purchase loan that encourage growth in rural communities. Exploring these options are important and may fit your unique needs. 
  5. Get preapproved yesterday (before you begin serious house hunting). In today’s world, it’s critically important to have a preapproval letter in hand to view properties. In fact, most Realtors won’t even show you homes without this letter, let alone, be willing to submit an offer for you because of the high demand and low supply of houses on the market today. A pre-approval helps you understand your buying power and to obtain one you will need to submit a loan application and have your credit pulled. In addition, by obtaining a credit report we can ensure any old debts aren’t holding you down.  
  6. When house hunting, know what features are most important to you. Start by making a list of the things you think are most important to you for your new home, be it a master suite, a three-car garage, an eat-in kitchen or something else.  As you look at more and more homes you may find that what was thought of as critically important now becomes  secondary. Or you may find that you need to concede on a few things to stay within budget. The more homes you look at the more you will understand what you can buy for your money and the more comfortable you will feel at that moment of truth when you are submitting an offer for your new home.

If you work closely with your lender, you can balance your budget alongside the Bali blinds and backyard oasis on your wish list.

The ICB mortgage team is available to answer your questions. Visit our mortgage page for more information or to contact a mortgage lender. We offer free consultations and three convenient ways to apply: in person, over the phone or our easy online application.  

Written by Tony Checkalski

Mortgage Loan Officer, Investors Community Bank, NMLS ID 523961

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