Many people dream of buying a home for the first time. Investing in a home is indeed gratifying, but it also comes with quite a few risks. Fortunately, there are steps you can take to ensure the transaction progresses as smoothly as possible. Bankrate explains common home buying mistakes and how you can work to avoid them.
Preapproval entails applying for a mortgage before actually shopping for a house. While this seems counterproductive, it's actually quite reassuring to sellers. Preapproval entails a check of your financial background, including your credit score. That way you and the seller can rest assured that you have the funds available to actually purchase the home. This is very helpful in crowded housing markets, where you may be in fierce competition for a single property.
In the same token, try to stick to your initial budget. Even if you're approved for a greater amount, it's best to be conservative when buying a home. Along with making a monthly mortgage payment, you'll also need to contend with taxes, utility costs, repairs, maintenance, and other fees. Being realistic about your finances will save you quite a few headaches down the line when it comes to your monthly payments.
The down payment is another cost you'll need to consider. Most people believe that a 20% down payment is standard when buying a home. However, this is not always the case. Buyers approved for government-backed loans can pay as little as 3.5% of the total cost of the home when making a down payment. Even if you're approved for a conventional loan, the average down payment is about 13%. Additionally, there are many programs suited to first-time home buyers that entail favorable down payments.