Not Knowing What You Can Afford
There is often a significant difference between what a bank says you can afford and what you know you can afford.
To figure out what you really have available to spend on a house…
1. Calculate a monthly budget, which includes all your monthly expenses (excluding rent.)
2. Place that within a yearly budget, which may include any premiums you pay annually or annual vacations.
3. Subtract this total from your take-home pay, and you’ll know how much you have left over to spend on your new home each month.
4. Use a Mortgage Calculator to research current interest rates. This will give you an estimate of what your monthly mortgage payments will be.
Being Too Picky/ Lacking Vision
These are two sides of the same coin.
● When you are too picky, you overlook the home that has outdated décor or fewer bedrooms, refusing to compromise even though you have a limited budget.
● When you lack vision, you forget that buying a house you can afford that meets your needs in terms of the big picture items (like location and architectural style) means you can upgrade the smaller picture items yourself later gradually, as your budget dictates.
● In fact, hiring a contractor is often cheaper than paying the increased home value to a seller who has already done the work for you.
Choosing Not to Hire an Agent or Using the Seller’s Agent
● Once you are seriously shopping for a home, do not walk into an open house without having at least the name of a real estate agent or broker that you are working with.
● Technically, the seller’s agent is supposed to work in both parties’ best interest, but it is obvious how this might not work out to your advantage. Make sure you have your own agent to represent you and your interests.
Using Up Savings on the Down Payment
● Spending all or most of their savings on the down payment and closing costs is one of the biggest mistakes first-time homebuyers make.
● Some people scrape all their money together to make the 20% down payment so they don’t have to pay for mortgage insurance, but they are “picking the wrong poison” because they are left with no savings at all.
● Take paying for mortgage insurance over not having money for rainy days. Everyone — especially homeowners — needs to have a rainy-day fund.
Not Maximizing Your Credit Score
Your credit score is directly tied to your interest rate and how good of a deal you get on your mortgage. If you can improve your credit score by as little as 20 points, you can potentially save thousands of dollars in interest.
Ways to Improve Your Credit Score Before Applying for a Mortgage
● Pay down your credit card balances
● Don’t apply for any other types of credit
● Don’t miss any payments
● Contact collection agencies if you have any collection accounts
● Don’t close any accounts- keep them open with a low-or-no balance
Real Estate Services in Los Angeles
Century 21 Peak offers the powerhouse performance of Century 21 Real Estate, combined with Peak’s local market expertise. Contact Us to find out how we can assist you with your home buying or selling needs and help you navigate the mortgage process.