Its not uncommon for people from different backgrounds in life to make financial mistakes. From making a purchase due to impulse buying to being sold car rental insurance or an extended warranty, there is a large host of things that may not be the most suitable for those who are trying to save money by reducing the amount that they want to spend.ˇ
This said, there are also larger purchases that can be made. All of which can signify that the person that is doing the buying can also make huge mistakes when they are purchasing major items like a home for the family to reside in. Which means, it is essential for buyers to make sure that they are doing the proper amount of research prior to signing on the dotted line. To avoid these and other related issues, here are four mistakes that can be made when purchasing a new home.ˇ
Failing to Become an Expert at Your Credit Report
Because the credit scores plays a vital role in purchasing a home, it is essential for the home buyer to understand how their credit score will impact the overall purchase. In fact, before a potential home buyer is pre-approved for their home loan, they will need to meet a certain benchmark number. This benchmark number may also vary greatly from one lender to another since it is based on a wide variety of different factors. For instance, the home buyer may not receive the best interest rates from the lender that they trying to get the loan from because of their low credit score and loan type.ˇ
Since the loan amounts and interest rates can easily become confusing without the proper understanding of the credit score and interest rates, people who do not understand how they work may end up paying the highest interest to the lender. As a result, the buyer may end up with a large monthly mortgage amount that they cannot afford. On the other hand, when the buyer does understand how the credit score affects the overall price of the mortgage, they can save thousands of dollars. For instance, if the buyer of the home agrees to pay 5.5 percent on a $350,000 mortgage (fixed rated) instead of a low rate of 4.5, they can spend as much $200 more a month in interest. This is essential knowledge that each buyer should know since the interest rates are normally determined by a low or high credit score rating.
Not Exploring Your Options
In addition to failing to understand the actual value of the credit score, some home buyers may not explore all of options that they have available to them. Which means, in cases where the homebuyer may not want to wait until their credit score is higher, they may also have the option of obtaining a loan from FHA or VA. Typically, these types of mortgages are known as less expensive because they are backed by the government, when the buyer can qualify. For instance, there are millions of service members and veterans that are eligible for these kinds of mortgages. As a result, some home buyers may find that they may not need a down payment to obtain a VA loan for their home. Because the government gives these individuals great breaks, they can also buy a home with a lower credit score, no down payment and no mortgage insurance. These breaks are not provided in the conventional loans that people seek to secure.
ˇTrying to Save Money and Time by Eliminating the Home Inspection
One drawback to government loans is home inspections are not mandatory. Therefore, they can also be risky when trying making a sound decision about the purchase. Avoiding these concerns, however, can be completely eliminated by hiring a professional inspector to do a thorough job. Also, even though there may problems that arise in the home, people can also seek to renegotiate the price so that the repairs can be made without having to pay them out of pocket.
Purchasing Too Much Home
Another huge mistake that can be made when purchasing a new home is buying too much home. This mistake normally occurs when the buyer does not review the debt to income ratio for their situation closely. For instance, many times the lender may choose to approve a largest amount for the home that the person is buying. However, it is essential for the buyer to know and understand when the amount that they have been approved for may be more than they really need to live comfortably.