Buying a home is one of the momentous events of your life. Buying your home is probably the biggest purchase you have ever made. So, you want to do it right and make a wise financial decision. But it can also create many challenges for mortgages for first time buyers. Here are some common mistakes made by first time buyers.
1. You are not giving enough time to it
It takes time and effort when you are looking to buy your first home. This process begins with assessing your financial situation, and you may need to rethink your family’s needs (school, sports clubs, and access to public transportation). Then, consider personal factors such as your future career goals and aspirations. For example, ask yourself if your new home is good enough to meet applicants’ needs and dreams. Or will you need a bigger (or smaller) property with different features in the future?
If you are a couple, you may want to have children in the future, so your needs will change. Spending enough time thinking about your current and future circumstances and needs will help you avoid common mistakes in buying your first home. These factors are related to the amount of debt you expect to get. Therefore, before applying for a mortgage, it is important to take the time to understand your current and future needs and carefully consider them.
2. Unplanned finances
One of the most common mistakes is when first time buyers do not check their finances in sufficient detail. Think of your assets and liabilities as a company’s balance sheet. This is what lenders do to pay you back. Your current monthly income and expenses and your financial situation in case of mortgage installments are among the most important things that first time buyers should carefully consider.
3. Inaccurate and insufficient review of the mortgage market
It is important to look at the mortgage market when buying a home. However, studying market fluctuations too much can save you a lot of time and energy. Also, sometimes, information in the media can give contradictory signals and does not necessarily reflect market realities. You should also be aware of short-term fluctuations that differ from long-term trends. If you want to make sure you know the market in its entirety, it is a good idea for a broker to help you.
4. Incomplete preparation of lenders’ required documents
When applying for a mortgage, lenders will need documents to determine your affordability, depending on the type of job or business you have. You can talk to a mortgage broker about this because they know the documents and information about the lender.
5. Not having enough savings to deposit
Larger prepayments are always better. The challenge of saving on prepayment is the first reason most first time buyers wait longer than they want to buy a home. Many first time buyers have the income and conditions to pay off their monthly mortgage – they have no deposit.
In many cases, paying a 20% deposit helps first time buyers avoid paying Private Mortgage Insurance (PMI), but it may be worth it to pay the PMI now and buy sooner. Advance payment may also help you pay off some or all of your initial expenses and help you get home sooner.
6. Not getting pre-approval
One of the mistakes of mortgages for first time buyers is not getting pre-approval. But the best time to get confirmation is when first time buyers think they want to own a home. A pre-approval requires talking to a broker or lender and providing proof of income and assets to first time buyers. Payment documents, tax returns and recent invoices from all bank accounts and first time buyers’ investments are the basis for lenders’ assessments. The lender will access the first time buyers’ credit reports and ask about their work history.
First, the lender can review the first time buyers’ credit reports and give them tips on fixing credit report errors or improving credit scores. Sometimes this process can take months, so the sooner it starts, the better. In addition, the lender states the maximum mortgage amount that first time buyers can borrow. Although first time buyers may not want to borrow up to a ceiling, it is important to know their price range before looking for a property they cannot afford. Another benefit of having a mortgage pre-approval is that when first time buyers find the right home, most sellers will need proof of your ability to pay for the home before signing a contract with the first time buyer. A letter of confirmation from the lender can lead to a successful purchase agreement.
7. Do not use a specialist and experienced advisor
There are many options and opportunities to get a first time buyer mortgage. The only difficult task is to identify programs that may be suitable for mortgages for first time buyers. Using the services of SWG Mortgages advisors will make it easier for you to search for different options. The key is to do some basic research and review lender acceptance criteria. To be eligible for a mortgage, first time buyers must meet certain criteria that vary depending on the lender. Homebuyers must also demonstrate that they have the financial means to repay the mortgage installments.
Ashley Slade is a Business and finance Expert and Writer at SWG Mortgages at London. We offer our clients, with diverse income streams and resources, a tailored financial solution.