3 Major Mistakes to Avoid as a First-Time Home Buyer

3 Mistakes to Avoid as a First-Time Home Buyer

The idea of buying your first home can be an exciting one. Putting down roots and finally having a space to call your own. But, the decision to buy a home is probably the biggest financial commitment you will make in your life, not only in the amount of money you will pour into your house but the amount of time you will be doing so. There is a lot to know as a first-time buyer and a little preparation can help you avoid costly mistakes down the road. Here are three mistakes that are particularly important to avoid.

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Not Checking Your Credit Report Thoroughly

Your credit report provides a very revealing picture of your relationship with money, and it is the primary factor in determining the conditions of your mortgage or whether you will get one at all actually. A couple of percentage points difference in  the interest rate may not seem like a lot, but when it comes to a loan for hundreds of thousands of dollars, that gap translates to tens of thousands of dollars in interest over the life of your loan. You should be checking a lot more than just your credit score; look at the actual report to make sure everything is accurate. If that account that you paid off in collections is still being shown as unsettled or a creditor wrongly noted a late payment, the dent in your score can be significant, and keep you from getting the best rate you qualify for. You want to do this several months before you plan on applying for a mortgage since it can take up to this long for your score to reflect these corrections.

Underestimating Costs

When it comes to choosing a house you can afford,  you need to think about a lot more than the mortgage payment. There are property taxes, insurance, utilities, repairs and a host of other costs that you are now responsible for—no more ringing up the landlord for a leaky faucet. To avoid getting in over your head, you should sit down and do a thorough working over of your finances. When financial experts advise you to keep housing costs to a third of your income at the most, they are not just talking about the mortgage principal and interest, they are talking about taxes and insurance too. There are lots of calculators available online that can help you accurately assess what you can afford when it comes to buying a house.

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Overestimating Your Willingness to Renovate

When a house is in less than perfect condition, a buyer can get a great deal on it.  You think of all the money you will save by purchasing a fixer-upper and doing the renovations yourself. It will give you a chance to really create the exact home you want. It is very exciting when we are in the thinking stage of things; all the exciting possibilities laid out before us. But, when it actually comes to making all these fixes, this enthusiasm may wane. It is going to take time and may feel like you are working a second job as a contractor; but unlike your other job, you are not getting paid. If you are not naturally handy or really do not enjoy activities in the home improvement arena, you may end up spending a lot more time and/or money than you anticipated. The finished product may not turn out as great as you imagined it. You may leave things undone and end up hating the house. If you come across a house that needs a lot of work, think carefully before buying it.

Kelli Cooper, writing on behalf of Sildy Cervera Miami luxury real estate broker, has covered a range of real estate topics from tips for getting your first mortgage to home buying tips for expectant parents.

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