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Buying a home for the first time comes with plenty of potential mistakes that can be avoided with an awareness of certain risks. Owning a home has no guarantee of financial security, especially for buyers who make wrong decisions in the beginning.
Learn What Is In Your Credit Report
Review your credit report, contact your credit bureau if you find inaccurate information. The credit bureau must investigate it and, if it is inaccurate, remove it. However, if the information is accurate, no one can require the credit bureau to remove it unless it is outdated. If you have been late paying your bills during the last 7 years, the credit bureau will tell creditors about your history of late payments and bankruptcies for 10 years.
If you are having difficulty paying debt and need help, you have some options. Contact the companies you owe money and try to negotiate a settlement or an adjusted repayment plan, or you can check the internet for non-profit financial counseling programs for help. Some universities, local county extension agents, military bases, credit unions, and housing authorities, operate such programs and charge very little, if anything, for their assistance.
Know how much house you can afford
Some times buyers spend a lot of time researching homes, but fail to do simple homework on their mortgage. Talk to lenders to find out how much house you can afford and how much you'll need for the down payment, closing cost, pre-paid's and reserves. Ask about program specifics pertaining to assumptions, seller financing, secondary financing, gifts, mattress money, sweat equity, interest rate buy downs, points, loan fees and mortgage insurance premiums. Any of these could play a big role in your mortgage.
Determine A Budget
Many first time home buyers don't anticipate the additional costs for maintenance, repair, utilities or taxes. Set aside about 1% of the home’s purchase price annually for upkeep, repairs and emergencies. All prospective home buyers should set up a budget to manage their finances. Following a budget helps you to pay off debt and save precious cash. It does this by making you very aware of your financial boundaries and goals.
Unnecessary Expenses
For many buyers, down payment is the biggest hurdle to overcome. A buyer’s down payment affects many components of a mortgage such as, availability of loan programs, interest rate amount, mortgage insurance premium, and monthly mortgage insurance amount. The lower your down payment, the higher the cost of interest and mortgage insurance. Mortgage insurance is expensive and doesn't even protect you, it protects the lender and you pay it. If you default, the lender is protected, but their still coming for you, unless you purchase another separate policy.
Agents typically generate 6-7% of a home sale. That's also how much it generally costs a home buyer, including the down payment, to get an FHA loan. When it's a buyers market, the housing inventory is high and everybody is selling their house, it might make sense to forgo some of these expenses. There are a lot of sellers out there who have homes listed on the internet and don't have them listed with agents. Don't Skip The Inspection Before signing anything, buyers should hire a professional inspector. The inspection could very well determine information the seller isn't likely to tell you. This information can help you determine if there will be any immediate or future expenses required and your purchase offer.
Is The Time Right To Buy A Home?
Opportunities for first time home buyers have never been better. Declining home values and low interest rates coupled with a stimulus tax credit of up to $8,000 can add a lot of value for new buyers today. Typically, tax savings and equity build-up are a primary source of financial freedom for homeowners, but buying an undervalued home goes a long way in itself.
Courtesy of: Colorado Home Loans |
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