May 19th, 2016 5:07 AM by Jackie A. Graves, President
Avoid these 4 errors
almost always make a few mistakes when buying their home. Perhaps they pay too
much, choose the wrong type of mortgage or neglect to budget for needed home
with a trustworthy, experienced lender can help prevent such mistakes. But
consumers also need to take responsibility for their budgets and choices.
buying a home, consumers need to develop a short- and long-term perspective on
their purchase," says Michael Harrison, regional manager at U.S. Bank Home
Lookup the lowest mortgage rates
are the four biggest financial mistakes of first-time homebuyers:
Spending the maximum on housing
qualify buyers based on their incomes and debt-to-income ratios without
considering how much the borrowers spend on items such as transportation,
savings, food and other necessities.
lot of first-time buyers are optimistic about the future and excited about
buying a home, so they borrow the absolute maximum they can afford instead of
allowing themselves wiggle room for a partial loss of income or for future
expenses such as children," Harrison says.
experts recommend that consumers decide how much they want to spend each month
on housing before meeting with a lender.
buyer should create their own budget and know their limits," says Stephen
Adamo, president of Weichert Financial Services in Morris Plains, New Jersey.
says many first-time homebuyers experience a sizable change in their housing
payments. Some new owners may go from $500 per month in rent to a monthly
mortgage payment of $2,000, he says.
need to deal with payment shock," Adamo says.
Not getting prequalified early
with a lender for a buyer consultation and prequalification for a mortgage should be the first
step toward homeownership. Yet many first-time homebuyers wait until they are
ready to start house hunting before contacting a lender.
never too early to set up a free buyer consultation with a lender," Adamo
says. "Every buyer needs to get prequalified early enough in the process
so that they can make some changes if they need to or correct errors on their
buyers may need to spend up to a year saving more money, increasing their
incomes or cleaning up their credit before making an offer on a home.
buyer consultation should include creating long-term financial goals and
strategies for buying property, Adamo says.
Not knowing importance of credit
most consumers know it's important to have a high credit
score, not everyone understands how costly a low score can be.
mortgage lending is done with a tier of interest rates and terms based on
consumer credit scores," Harrison says.
with credit scores of 740 and above tend to get the lowest rates and fees,
saving potentially thousands of dollars. Mortgage-related fees usually are a
little higher for credit scores from 720 to 739, and they go up for every
20-point downward increment in credit scores. Interest rates can go up, too.
should learn about credit scores the minute they start working, Harrison says.
after a mortgage approval, consumers must avoid applying for new credit or
taking on new debt, Adamo says, because a second credit check is often required
Choosing the wrong mortgage type
homebuyers today typically opt for a 30-year fixed-rate mortgage.
Harrison says home loan alternatives to a 30-year fixed sometimes make more
sense. For example, buyers who are certain their companies will relocate them
within five years may find a 5/1 adjustable-rate mortgage "could be a much
better mortgage," he says.
no reason to pay a premium for a product you don't need like a 30-year
loan," Harrison says.
eager to build equity in their homes or who are older and want to live
mortgage-free in retirement should consider a 15-year fixed-rate loan or, if
they can afford it, even a 10-year mortgage to reach their goals.
Michele Lerner - To view the original article click here