First-Time Homebuyer Mistakes to Avoid

Buying a home for the first time can be a thrilling experience – steer clear of the following mistakes to make sure you end up with the home of your dreams.

1. Buying a home that is overtly expensive
   One of the most common mistakes buyers make is choosing a home that’s too expensive. You can get an estimate of how much you can afford by looking at your debt to income (DTI) ratio. Though the maximum DTI for the majority of mortgages is 41%, the recommended DTI is only 36%.

   There will also be other costs related to your mortgage, including homeowners association (HOA) fees, property taxes, and insurance.

2. Not setting aside money for other expenses
   Keep in mind that owning a home is very different from renting. If something gets damaged, you’ll have to pay for it yourself. You’ll also need to replace certain items or fixtures within your home. Make sure you have an emergency fund for repairs and replacements upon buying a home.
3. Not working with a Realtor
   Some buyers may not feel like they need a real estate agent – however, choosing not to work with one could potentially cost you thousands of dollars and your dream home. Work with a local expert who knows the market well.

   If you’re looking to buy a home in Santa Rosa or the surrounding communities, let Brad Wilkinson assist you. Call him at 1.707.799.0455 or send an email to Brad(dotted)Wilkinson(at)CBNorcal(dotted)com.

4. Not shopping around for a mortgage
   It’s generally advisable to get loan offers from about four to five lenders. Comparing closing costs and mortgage rates will help you get the best rates on your mortgage. This will also allow you to get additional advice from loan officers, as well as get a better feel for the kind of loan officer you’d like to work with.
5. Lying to loan officers
   Withholding information or misrepresenting yourself can either delay or cancel closing. Keep in mind that the loan officer is on your side – if you don’t have the necessary pay stubs or tax returns, it would be better to be honest. This way, the loan officer will be able to guide you through the steps you’ll need to take.
6. Not exploring all mortgage options
   There are numerous mortgage options out there, and the only way to know which one’s best for you is to do your research and talk to as many lenders as possible. You have a great selection of conventional loan programs to choose from.

   However, conventional loans require a 5% to 20% down payment, and if you’re not putting 20% down, you’ll have to pay mortgage insurance. Securing an FHA loan allows you to come up with just a 3.5% down payment, with a credit score of 580 or higher. This type of loan is ideal for first-time buyers with bad credit, and who can only come up with a smaller down payment.

7. Not making the most of their credit score
   Your credit score is closely tied to the interest rate and how great of a bargain you’ll get on your mortgage. Unfortunately, buyers are unable to make their credit score as high as possible. If you can boost your credit score even by as much as 20 points, it will have a huge effect on the interest rate, and potentially save you hundreds to thousands of dollars’ worth of interest.
8. Being disorganized and unprepared
   The buying process involves tremendous amounts of paperwork. Firstly, you will need to gather documents, such as bank statements, tax returns, and identification, when talking to a lender. Being disorganized and not having these documents ready will delay your closing. Check this documents checklist to know which papers you’ll need beforehand.

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