3 Most Expensive Mistakes First Time Home Buyers Make
Buying your first home can be overwhelming. On top of finding both a home and a mortgage, you have to learn all of the mortgage terms, fill out tons of paperwork, and make sure you're getting a good deal. It is no surprise that so many first-time home buyers make costly mistakes when purchasing their home. Here are the three most expensive mistakes that first-time home buyers make and how to avoid them:
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When applying for a bad credit mortgage loan, make sure you are current on your existing credit lines. You will want your current credit to be as good as possible.
Also, make sure to include all the income you have. If you have any equity in any stocks or other financial accounts, make sure to mention that to the broker as well.
The more money you can put down on the loan, the more likely it is that you can get approved. FHA loans usually only require 3-5% down. They are also usually open to working with people with credit problems.
They Don't Have Their Home Inspected
Having your home inspected can cost several hundred dollars, but it can save you thousands of dollars in the long run. Inspectors can check for things like bad wiring, weak foundations, mold, etc. These problems can cost you thousands of dollars to repair, so it's best to either avoid homes with these types of problems or plan on the costs of repairing it in the total amount you're willing to spend on your mortgage.
They Don't Evaluate Their Mortgage Options
First time home buyers are usually eligible for some form of government funding—down payment assistance or fixed, low interest rates. However, mortgage companies will not offer you these loans; borrowers must research these benefits and request them. Each state provides a list of mortgage companies that offer FHA loans that can be accessed through the HUD website.
Their Down Payment Is Too Low
A low down payment will affect your interest rate if your loan amount is not considerably lower than the appraised value of the home. Lenders calculate your loan-to-value ratio (LTV) to determine their risk in the transaction. A higher LTV will represent a higher risk for the mortgage company, so they will raise your interest rate. Even if the difference in interest rates is small, a higher interest rate could cost you thousands of dollars over the life of the loan.
Recommended Home Mortgage Lenders:
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The average rate of interest on mortgage loans continues to fall and has been under 5 percent for almost all of this past year, with this recent round of rate cuts seen as the lowest for borrowers in years. The reason, many borrowers today have bad or at least less than perfect credit scores. Still a borrower with less then perfect credit an jump through a few hoops and get a fairly decen rate on a loan.
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