If you are ready to purchase your first home, there are a few things that you need to make sure that you do in order to avoid some classic mistakes that can derail the process.
#1: Don't Start Looking for a Home Before You Apply for a Mortgage
You can look online at real estate for sale before you get pre-approved for a mortgage. However, you shouldn't book actual physical viewings with a real estate agent until you are pre-approved for a mortgage.
Almost no seller is going to take any offer you make on a home seriously unless you can back up that offer with a letter from a lender stating that you were pre-approved for a loan. Many housing markets move quickly, and you don't want to waste your real estate agent's time or the seller's time with physical viewings if you are not in a position to make an offer on a home.
This will also save you the heartbreak of falling in love with a property, but not being able to get it because you cannot put in a strong offer with a pre-approval letter from a respected mortgage lender.
#2: Don't Go Through the Pre-Approval Process With Only One Lender
Second, you need to make sure that you go through the mortgage pre-approval process with more than one lender. Contact at least three different lenders, banks, or mortgage brokers.
This will allow you to compare the different loan terms, lender fees, and rates that you are offered. With three different offers, you will be able to choose the financial company you want to work with that will offer you the best terms. Failing to get competing offers could cause you to get loan terms that are not that favorable for you.
#3: Don't Go Over Your Budget
When it comes to purchasing a home, don't go over your budget. Going over your budget can put a strain on your finances and can put you in a position where you may not be able to afford the payments on your home, which is not a position you ever want to be in.
Don't max out whatever loan amount you are offered by the lenders you apply with. Instead, look at homes below the maximum that you were approved for, and figure out how much house you can afford and still comfortably pay your mortgage.
#4: Don't Use Up All Your Savings
You don't want to use up all your savings when you purchase a home. You need to make sure that you have enough money for the down payment and closing costs. You also are going to want to have extra money to pay for moving and little fixes, liking painting, that you may want to make on the home. It is also smart to have three to six months' worth of mortgage payments set aside at all times.
When it comes to purchasing a home, don't start the viewing process until you have been pre-approved for a mortgage by at least three different lenders. This will provide you with information about what type of loan you can get, and when you make an offer, having a pre-approval letter will show you are a serious buyer. Don't go over your budget and don't use all of your savings; find a home you can afford.