The process of buying a new home for the first time can be both one of the most exciting times in your life, but also the most daunting, especially when it comes to ironing out the details on how to get approved for your first home loan. At The Reichert Mortgage Team, we have had the honor of securing many homes for first time home buyers in Colorado Springs, and we have learned a lot along the way. We’ve compiled a three-part series for first home buyers: What to Avoid, What to Expect, and How to Prepare. For this first section, we’ve put together a comprehensive list that focuses on what to avoid as a first time home buyer. Since we have assisted so many people to obtain their first home we want to make sure that you don’t make the same mistakes first-time home buyers tend to make. We hope that these first time home buyer tips serve you well and that you can find your home and a perfect loan with minimal stress.
Committing Too Soon
Perhaps you’ve talked to a lender that you feel comfortable with and your realtor found the home of your dreams. It all feels like fate coming together, but it is important to take a step back.
When it comes to mortgage lenders and brokers, it is crucial to compare rates, loan terms, and lender fees to ensure your needs align with their offers. It’s a special feeling to find the home you’ve always imagined, but take time to go through your finances, look at the timeline, and make sure all inspections are good to go before committing too soon. Since this is such a significant decision, you want to make sure that you have cleared all the options and have a good team of real estate and mortgage professionals that you can trust. As this will be the first time you are dealing with a lot of the paperwork it is important to have a quality broker and real estate agent on your side.
Spending Too Much
Unfortunately, many first-time home buyers tend to drain their savings accounts on down payments which can be a very costly mistake. Many mortgage lenders have first time home buyer loan options that include down payment assistance. At The Reichert Mortgage Team, we have loan options that are specific to first time home buyers, as well as down payment assistance programs that you can get approved for. Ask us or your preferred lender how you can get more information on programs like these.
It is also important to pad your savings past the initial down payment, as many more expenses go into the process of buying a home. Never scrape your money together to make ends meet; talk to your lender about additional options, extend your timeline to secure additional finances, or look for homes that are more in your budget.
You may find your perfect home, but if it doesn’t align with your budget, then it is much better to adjust your expectations rather than stretch your budget. Stretching your budget now to secure the home you want may put you at risk of losing your home in the future. Focus on your monthly payments and what is truly feasible even if a financial concern presents itself in the future. A quality mortgage lender will be able to help you make decisions like those, especially if they have your best interests in mind, rather than their own. Buying your first house is exciting but at the end of the day its better to buy the house that is in your budget rather than loos it to the bank in a few years.
Not Managing Your Timeline
The timing for virtually every decision first time home buyers make will determine the outcome of the process itself. Apply for a mortgage before looking for homes, don’t take out any new loans or credit cards near the time you are trying to secure a home, and manage your financial timeline expectations so you don’t run short on funds during this lengthy process. Many first time home buyers are not aware that home buying is not like any other purchase in your life. You can buy a candy bar in minutes and a car in hours, however, a home can take months. If it’s your first time buying a home remember to be patient and arrange for other living situations in the mean tune.
It’s important to apply for a mortgage before looking for homes so that you can look at markets that will satisfy your needs before falling in love with a home that you later discover you won’t be approved for. Obtaining pre-approval is key before moving to the home search. In addition to not getting your hopes up on a home, you cant afford pre-approval gives you a more attractive offer application. After being pre-approved you will begin your home search. Once you have located a home you like you and your real estate agent will draft an offer letter. This letter contains your pre-approval and how much money you offer to pay for the home. If you are not pre-approved your chances of getting the home are much slimmer. First-time home buyers often forget that the housing market is extremely competitive especially in Colorado.
Avoid Big Purchases
Once the home buying process starts, a lot of new home buyers take out additional loans or lines of credit to start furnishing their new place, manage renovation projects, and more. Once lenders pull your credit, it will raise a red flag if new credit was recently established and could seriously jeopardize your ability to secure a home loan. Although you are now pre-approved you have not signed on the dotted line with the lender. They still reserve the right to not lend you the money. To play it safe make sure not to take out any additional lines of credit during this time.
Not Using VA, FHA, and USDA Loan Benefits
The top monumental rookie mistake for a first time homebuyer would be to not take advantage of VA, FHA, and USDA loan benefits. This is especially important for veteran first-time buyers. The VA loan program was originally designed to assist first-time buyers after returning from the war to secure a loan and a home. Not taking advantage of this as an active duty or veteran is a gigantic mistake as can save you thousands. Additionally, the federal government has developed different plans through the Federal Housing Administration (FHA) and rural housing development guaranteed loans USDA to assist first-time buyers.
Moving To Fast
As you go through the home buying process make sure to not rush it or force anything. Since there are so many moving parts it is important to make sure that you are not moving too fast. Check everything off the list and make sure you are ahead of the game.
Not Looking Into First Time Home Buyer Programs
In addition to the government blacked programs first time buyers should take advantage of the many first time home buyer programs available to them. From down payment assistance to low-interest loans these programs help get first-time home buyers out of the rental market and into a home. Vist Part II: Down Payment Assistance to learn more about these programs.
Questions on Getting Approved for a First Time Home Buyer Loan? Contact The Reichert Mortgage Team!
Let’s keep the process of home buying exciting, yet manageable. This list barely scratches the surface of everything you need to know as a first time home buyer, which is why this is part one of three in our first-time home buyer series. At The Reichert Mortgage Team, we value integrity above all. We put your needs far above our own, and make sure that your loan is the best option for you and your unique circumstances.
We work with first time home buyers all over Colorado Springs and Southern Colorado, which means that we have the expertise to get you through this exciting time in your life. If you have any questions at all, contact us to set up a time to discuss how we may best serve you so that you can go back to planning your perfect home.