First-Time Homebuyer Mistakes

Buying your first home is exciting, but it can also come with a lot of questions. How much home can you comfortably afford? How much should you put down? When should you talk to a lender? For first-time buyers especially, it’s easy to get caught up in finding the perfect home before fully understanding the financial side of the process. Knowing what to expect before you begin can help you avoid some common mistakes and make more confident decisions along the way.

Looking at the Price Tag Instead of the Full Budget

It’s easy to fall in love with a home that stretches your budget, especially when it checks every box on your wish list. But the amount you qualify to borrow and the amount you can comfortably spend each month aren’t necessarily the same. When determining how much you may qualify to borrow, lenders consider factors including your debt-to-income ratio, which compares your monthly debt obligations to your income. But your mortgage payment isn’t the only expense to consider when deciding what fits your household budget.

Closing costs, property taxes, homeowners insurance, utilities, maintenance, homeowners association (HOA) dues, and other ongoing expenses can all add to the true cost of owning a home. Estimating these costs before you begin shopping can give you a more realistic price range and help you avoid overextending your finances.

Legacy Bank’s mortgage loan calculator can help you begin estimating what a home loan may look like for your budget.

Starting Your Home Search Before Getting Prequalified

Touring homes is usually more exciting than gathering pay stubs and bank statements, but getting prequalified first can make the homebuying process much smoother. Beyond giving you a clearer idea of your purchasing power, a prequalification shows sellers that you’re a serious buyer who has already taken steps toward securing financing. Some sellers may even require a prequalification or preapproval before considering an offer.

What’s a Prequalification?
A mortgage prequalification is an estimate of how much you may be able to borrow based on information you provide about your income, assets, debts, and overall financial situation. It can be a helpful first step in the homebuying process because it gives you a general price range to guide your search.

While a prequalification differs from a preapproval, which typically involves a more detailed review of your finances and credit history, both can help you better understand your homebuying budget. A prequalification can help you start your home search with greater confidence and a clearer understanding of your financing options.

Assuming You Need a 20% Down Payment

The amount you put down on a home can affect your monthly payment, interest costs, and other expenses associated with your mortgage. While 20% is often treated as the standard down payment, it isn’t the only option. Depending on the type of mortgage you qualify for, you may be able to purchase a home with a smaller down payment. With a conventional loan, however, putting down less than 20% may mean paying private mortgage insurance (PMI), which protects the lender if the borrower defaults.

Before choosing a loan, learn the minimum down payment requirements and other costs associated with each option. Putting more money down can have advantages, but draining your savings simply to reach 20% may not be the right choice for your household. A knowledgeable lender can help you weigh the options and understand how different down payment amounts could affect your loan.

Choosing a Mortgage Without Comparing Your Options

You shop around for the right home, and it can be just as valuable to shop around for the right mortgage. Interest rates, closing costs, and lender fees can vary, and even a seemingly small difference in your mortgage rate can add up over the life of a long-term loan. Instead of accepting the first quote you receive, talk with reputable lenders and compare your options.

Remember to look beyond the advertised interest rate. Reviewing the annual percentage rate (APR), estimated closing costs, lender fees, and loan terms can give you a more complete picture of what each mortgage will actually cost.

Overlooking First-Time Homebuyer Assistance

First-time homebuyers may have access to programs designed to make purchasing a home more affordable, including down payment or closing cost assistance for example. Eligibility and availability vary, so take time to research programs offered in your area and ask your lender what resources may be available to you. Some assistance programs may add additional steps or time to the process, but that doesn’t necessarily mean they aren’t worth exploring. Understanding all your options can help you make the most informed financial decision before moving forward.

Start Your Homebuying Journey With Legacy Bank

You don’t have to understand every part of the mortgage process before you begin. Having an experienced lender in your corner can help you understand your options, ask the right questions, and choose financing that makes sense for your household.

At Legacy Bank, our friendly, knowledgeable team offers competitive mortgage rates and a variety of mortgage loan options designed to meet the needs of first-time homebuyers throughout Wichita and South Central Kansas. We’ll work with you throughout the process to help find the right home loan for your needs.

Contact Legacy Bank to learn more about our mortgage options and current rates.