March 2017 - Mercer Savings Bank

Buying a home is a big deal. It may be the single biggest purchase you make in your entire life. The purchase of your home is usually a 30-year or longer commitment.Buying a home for the first-time is a milestone in every person’s life. You’re finally taking part in the American dream!In today’s financial climate, it’s easy to make a small mistake that may delay or prevent your participation in the American dream.10 Mistakes First-Time Homebuyers MakeInvestopedia personal finance expert Amy Fontinelle has come up with a list of the most common mistakes:#1 Overestimating How Much You Can AffordMortgage brokers will frequently offer you estimates of how much house you can afford. Don’t believe them.Instead, make a list of all your monthly expenses except for rent. Include your car payment and insurance, student loan and credit card payments, groceries, utilities, food, health and renter’s insurance, retirement savings, pets, and projected entertainment expenses. If you pay insurance annually, prorate the amount and include it. Then, subtract it from your average monthly take-home pay (not the gross). The amount that’s left should be more than your monthly mortgage payment.Why should it be more? When you purchase a home, you have additional expenses, such as property tax, home insurance, and repairs. If you have a condominium or live in a place with a homeowner’s association, you’re likely to incur additional fees.If the amount left over is not sufficient to consider buying a home, consider taking a second job or cutting back on your expenses.#2 Neglecting to Get Preapproved for a LoanYou can fill out all the online calculators you want, but a bank must consider additional factors, such as your credit score and your income stability. Preapproval will put smiles on the faces of your realtor and the seller’s realtor. In addition, you won’t find out later that you can’t afford the home or that the terms of the loan are unacceptable.Preapproval differs from prequalification. Prequalification gives you an estimate of how much home you can afford. It does not include a credit check or a real assessment of your ability to purchase. And it’s not a guarantee of a loan.____________________How to select a mortgage provider____________________#3 Not Shopping for a LenderIndividual lenders have varying rates and different criteria for approval. Your local community bank uses different criteria to qualify borrowers than a large online bank.The Federal Trade Commission advises homebuyers to shop around to get the best terms. Ask potential lenders these questions.#4 Inflexibility or Too Much FlexibilityAs a first-time homebuyer, you’re unlikely to be able to afford your dream home. Refusing to compromise may leave you renting for longer than you wish and with an unhappy real estate agent.On the other hand, compromising on your priorities can leave you frustrated with the home soon after you move in.#5 Sweating the Small StuffTurning down a home that is otherwise ideal because you can’t afford to change the carpeting or renovate the bathroom immediately is short-sighted. Consider the big picture. Renovations are much cheaper to do yourself than to have the homeowner do for you.#6 Developing an Emotional AttachmentYou can already picture your furniture in the home and your car in the garage. Real estate agents can smell someone who’s fallen in love with a home a mile away. You might get a much better deal if you contain your excitement.#7 Failing to Look Beyond the GlossHome staging can make a house look beautiful, but it’s important to check out the bones of the house. A beautiful home with a bad foundation is a waste of money in most cases. Use a home inspector. Don’t pay more than the home’s worth just because you’ve fallen in love with it.#8 Neglecting to InspectAfter you go into escrow, have the home inspected. Even if you are a contractor, it’s wise to have a professional home inspector do it because you can present their inspection to the seller if something needs fixed before you close. An inspection report not only assures you the house doesn’t require expensive repairs, you can use it to bargain with the seller.#9 Failing to Get Your Own AgentThe seller’s agent is working for the seller, not you. Even if they claim they’re working for both the buyer and seller, they’re still going to be biased toward the seller, who’s paying their commission. Get your own agent.#10 Neglecting Future PlanningA home is a commitment. You’re investing money in your home and in the community. And you’re committing your money for a period of time, because it’s rare to get much value from a house if you sell it quickly.Consider the following:Is there a chance you’ll be transferred or have to move for your job?If you plan to have children, do you like the school district?Are there any development plans for the neighborhood? Is there a mall or a grocery store being built nearby that may increase traffic? Is a road being expanded? Go to your city or county’s development department and ask.Are any assessments planned? Go to your city hall and ask.What are the zoning laws in your neighborhood? Ask at city hall.If there’s undeveloped land, is it zoned? What’s likely to be constructed there? Ask at city hall or at the county auditor’s office.Research nearby parcels via your county auditor’s online portal. Get an idea of what the neighbors paid for their homes.Ask your real estate agent to research whether local homes have appreciated or whether home values have declined.Mercer Savings Bank has been helping first-time homebuyers in your—and our—community for 125 years. Call 877.672.4543 to speak with a mortgage loan officer, fill out our online mortgage application or visit a Mercer Savings Bank location near you today.

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10 Mistakes First-Time Homebuyers Make

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