First-time home buyers step into the market each year and make the same mistakes their parents, siblings and friends made when they bought their first homes.
But newbie buyers today can interrupt the loop. Here are 12 mistakes that home buyers make for the first time — and what should they do instead.
Key takeaways
- Determine how much house you can afford to avoid wasting time and seeing homes beyond your means.
- Shop around for mortgage rates and compare offers from multiple lenders to save money.
- Check your credit report for errors to ensure you receive the interest rate you deserve.
1. Not figuring out how much house you can afford
You could waste time, without knowing how much house you can afford. You could end up looking at homes you can’t afford yet, or visiting homes below your optimum price point.
The goal for many first-time buyers is to purchase a house and secure a loan with a decent monthly payment that will not keep them up at night. Aiming small is also a good idea.
How to prevent this mistake: Use a mortgage affordability calculator to help you know the affordable price range, the stretch and what’s aggressive
2. Getting just one rate quote
Shopping for a mortgage is like shopping for a car or any other expensive item: It pays to compare offers. Mortgage interest rates vary from lender to lender, and so do fees such as closing costs and discount points.
"Mortgage applications within 45 days count as one credit inquiry.”
How to avoid this mistake:
Apply with multiple lenders. By comparing five lenders, NerdWallet finds, a typical borrower might save $430 in interest only in the first year. All applications made to mortgage within a 45-day period would count as one credit inquiry only.
3. Not checking credit reports and correcting errors
Mortgage lenders must scrutinize the credit reports while determining whether and at what interest rate to accept a loan. When there are mistakes on your credit report, you could get quoted an interest rate that is higher than you deserve. That’s why checking if your credit report is accurate is a must.
How to avoid this mistake:
Every year you can register for a free credit report from one of the three main credit offices. You may dispute any errors you find.
