There are a number of Boston area homebuying mistakes that need to be avoided. Let’s look at three very important tips that will help you avoid common pitfalls associated with buying your first home. Anticipating your needs will go a long way in assisting you in the process you’re about to undertake. In addition, it will help make the experience a potentially fun and rewarding one.
We’re reminded of a true story about one first-time homebuyer who had scrimped and saved diligently for several years to accumulate a down payment. However, because he was self-employed he worried whether he would have enough for a sufficient down payment and if he would be able to qualify for a mortgage since he didn’t earn a “traditional” salary like most young borrowers who work for somebody else.
Unfortunately, stories and concerns like these occur all too often and can fall into the category of Boston area homebuying mistakes to avoid – especially among prospective first-time buyers. The Economic and Strategic Research Group of Fannie Mae recently conducted a survey to better understand what consumers know about mortgage qualification criteria. The findings revealed that roughly 40% of potential borrowers did not know when asked about minimum down payment requirements. In addition, 54% and 59%, respectively, were not aware of minimum credit scores and maximum debt-to-income ratios to qualify for a mortgage loan. The lack of knowledge in these basic areas of mortgage qualification is both surprising and disconcerting. Furthermore, it can contribute to common mistakes first-time homebuyers may make as they try to avoid Boston area homebuying mistakes. Now, about those tips:
Seek professional advice
The above story about the first-time buyer, we’re glad to report, did have a happy ending. The prospective homeowner sought help from a local HUD-approved housing counseling agency who reviewed his credit score, advised him on making some minor changes, and provided him assurance he could qualify for a HomeReady mortgage through Fannie Mae. The HomeReady program allows borrowers to pay as little as 3% for the down payment. In addition, it requires completion of an online education course. With the help of a professional, our first-time buyer was able to qualify for a low down payment mortgage – with his self-employed income – and purchase the home he wanted.
Understand the loan process
Lack of knowledge can be the single most detrimental problem to overcome for any first-time homebuyer. Fear of the unknown is likely the cause of many young buyers remaining on the sidelines when it comes to participating in the homebuying market and avoiding Boston area homebuying mistakes. The irony, however, is that in today’s informational age there is a wealth of knowledge available to prospective homeowners with just a click of the mouse. Virtually every reputable real estate company and hundreds of publications – both in print and online – provide easy to follow guidelines concerning how to go about searching for a home to buy and financing the home you choose.
Armed with a basic understanding of what is involved in shopping for a home, how to obtain information on homes for sale, and the various financing options available a first-time home buyer can and will have an advantage that comes with knowing what to expect. The old adage, “Knowledge is power” certainly rings true when it comes to avoiding Boston area homebuying mistakes.
Avoid these typical pitfalls
There are three major issues that can thwart first-time homebuyers during the process of buying and/or financing their home purchase:
• Going rogue
While it’s both enlightening and educational to do some preliminary online home shopping, it’s probably not a good idea to strike out on your own and visit homes you like. As we’ve mentioned above, talk with a housing counseling agency, a real estate professional, or a mortgage lender to help you better understand if you’re fiscally ready to buy a home or continue renting. Statistics provided by the Zillow Group Consumer Housing Trends Report show that just 46% of buyers were able to buy the first home on which they issued an offer. This confirms that in a fast-paced real estate market, competition and disappointment go hand-in-hand. It’s probably a good idea – and good business – to enlist the aid of a professional to better enhance the outcome.
• Shopping for homes outside your price range
Many real estate professionals recommend first-time buyers get pre-approved before they begin the home buying process. Pre-approval can include the completion of a mortgage loan application and the submission of pertinent supporting documentation such as tax returns, W-2s, or pay stubs to verify income. In addition, a preliminary credit report can be ordered for those prospective applicants concerned about their credit scores preventing them from qualifying for a home mortgage. In addition, real estate agents and mortgage lenders advise first-time home shoppers that just because you’re approved for a certain price range doesn’t mean you should necessarily spend the entire amount. We suggest using your pre-qualification amount as a guideline to demonstrate what you may be able to afford and compare that to what you can comfortably afford to pay each month – taking into consideration your other monthly expenses. The bottom line here is, look at only those homes that are in your price range and that you can comfortably afford. This is a better plan for avoiding Boston area homebuying mistakes financially.
• Not comparing mortgage quotes and notes
Recent research cited by Fannie Mae shows just two-thirds of prospective borrowers actively received more than one mortgage interest rate quote. Comparison shopping for the best interest rates, terms and conditions will give you a better selection from which to choose, and will ultimately give you peace of mind knowing you considered other mortgage options. In addition, if you don’t take the time to shop around, you could be spending thousands of dollars more than you need to over the life of your mortgage.
Read more about home buying tips in the section of articles on Boston area Home Buying Tips just below our Boston area Real Estate Categories in the column to your right. Remember, we also post tips daily on Facebook and Twitter. Check us out there, too.