1st Time Home Buyers' Mistakes
First time home buyers’ mistakes to avoid
Buying a house is a life-changing event that can be one of your greatest accomplishments. It involves making many important decisions, which can be stressful because the last thing you want to do is make a decision that will cost you time and money. Many first-time home buyers make common mistakes that can negatively impact their mortgage process and turn what should be a joyous occasion into a stressful experience. As a first-time homeowner, knowledge is power, so take advantage of all the resources available to you.
Every year, new home buyers enter the market and make the same mistakes that their parents, siblings, and friends made when they bought their first homes. Look at these first-time home buyer mistakes to avoid potential roadblocks on your way to homeownership and to break the cycle.
1. Buying more house than you can afford
It's easy to fall in love with a home or property that's way out of our price range; for some, it's an HGTV kitchen; for others, it's a home on a huge estate with acres and acres of land. After all, it's ok to dream and set goals, but we must remember that over extending is never a good idea. With mortgages and monthly payments, faking it until we make it does not work. Like the St. Lucian proverb says, " Do not hang your hat where your hand can not reach." This simply means that we should not take on more than we can afford. Remember that you have other responsibilities besides your monthly mortgage payments, such as buying food and paying bills. Your goal should be to have a monthly mortgage payment that is comfortable for you and does not stress you or keep you up at night. Purchasing a property that costs more than you can afford can drain out other savings, such as a retirement account or a child's school fund.
Instead of focusing on the maximum mortgage amount you qualify for, consider what monthly payment you can comfortably manage. Qualifying for a $350,000.00 loan does not imply that you can easily manage the $1,800.00 monthly payment while still meeting your other monthly responsibilities and extra costs associated with homeownership.
You can talk to one of our loan officers or use our mortgage calculator to determine how much loan you can afford. To calculate your estimated mortgage monthly repayment amount, visit https://jannou.org/
Above all, be open and honest with yourself and your loan officer about your financial situation. The last thing we want for our members is for them to be responsible for repaying a loan that they cannot afford and that puts them in a financial bind.
2. Not filing for taxes before applying for a mortgage
Another common mistake made by first-time home buyers is failing to file their taxes prior to qualifying for a mortgage. If you have never filed taxes before, you may not be able to proceed with your mortgage application because your tax clearance letter is a vital document that lenders require. Lenders examine your tax returns to verify your income as part of the application process. They'll need proof that you have been consistently earning enough money in recent years to cover your monthly mortgage payments on a specific property. Not filing taxes is a major red flag for lenders. Many lenders will not provide you a home loan if you can't verify your annual income. That means you're stuck until you prepare and file all unfiled tax returns.
The good news is that filing for taxes is usually rather simple. Once you file, you might even get a tax refund to help you with your down payment on your home. Ensure that you request your income tax documents from the credit union. If you have not done so visit https://jannou.org/contacts.
3.Not having the necessary documents available
If you're thinking about applying for a mortgage, it's a good idea to start gathering your financial records and documents. These records assist lenders in making a more accurate assessment of their members, such as how much they can afford and what mortgage rate they should be offered. Because requesting or processing these documents take time, having them readily available will speed up your application process.
Speak to your officer and create a checklist of all the documents that you would need. As you go through the checklist, find each document, start organizing the files and keep them in one folder or envelope. You'll be able to quickly produce them from one central location when your lender asks for these mortgage documents.
4.Draining your savings
When you own a property, you will almost certainly require an unanticipated repair sooner or later. Perhaps you'll need to replace a pipe or pay your homeowners insurance, which can be a bother for many first-time home buyers. Most people have drained their savings by making large purchases right before closing on their mortgage. Some people spend the majority of their savings on the down payment and minor finishing touches, such as installing security systems or furnishing the home. Before you apply for a mortgage, make sure you have enough money set aside for a down payment, moving costs, and any unexpected expenses. It's also a good idea to keep 3 to 6 months' worth of living expenses in an emergency fund.
Set up a savings account, such as our S-200 or winners circle, and set up automatic transfers from your salary each month to make saving easier. Remember that getting a mortgage isn't everything, so don't blow through all of your savings after or before the process is over. Make sure you have a healthy savings account with enough money to handle any unexpected expenses.
5. Being irresponsible when it comes to your credit
Another major mistake made by first-time house buyers is applying for new credit or being careless with their spending, both of which you should avoid at all costs. The time between applying for a mortgage and moving into your home is crucial, and you should leave your credit alone during that time. You should avoid getting a new credit card, buying new furniture or appliances on hire purchase, or taking out a vehicle loan until your mortgage procedure is completed. Any additional loans or credit card accounts could affect the loan approval process. First timers often learn from this mistake the hard way. Do not open new credit cards, close existing accounts, withdraw your money, take out new loans, or make major purchases on existing credit accounts throughout the mortgage process. Do however pay your bills on time and in full every month. Do not skip payments!
References
Adams, L. (2018, July 28). What Every First-Time Homebuyer Should Know. Quick and Dirty Tips. https://www.quickanddirtytips.com/money-finance/real-estate/what-every-first-time-homebuyer-should-know
Lewis, H. (2019, March 19). 12 First-Time Home Buyer Mistakes and How to Avoid Them. NerdWallet. https://www.nerdwallet.com/article/mortgages/first-time-home-buyer-mistakes-that-are-easy-to-avoid
TaxGroupCenter. (2021, February 22). Can I Get a Mortgage with Unfiled Taxes? Tax Group Center. https://www.taxgroupcenter.com/mortgage-with-unfiled-taxes/#:~:text=Lenders%20use%20your%20tax%20returns
