Not Preparing Your Finances Most people understand they’ll need a down payment and should be ready for closing costs, but when was the last time you checked your credit? In addition to your credit score, banks will look at a few areas of your finances: • Employment and income history. • Rental payment history • Debt-to-income ratio. Your monthly debt payments shouldn’t be more than 43% of your

income. • Buyers with credit scores above 720 can receive more attractive rates.

Before you start looking for homes, spend a few months cutting down your debts, making responsible payments and saving money for the costs of a mortgage.

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Not Getting Pre-Approved Once you’ve gotten your financial house in order, it’s time to approach a mortgage lender to see how much you can afford. Rather than having a firm idea of what they can afford, many buyers just pick a number they think they can afford, and can often run into trouble

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Here are a few things that pre-approval will make easier: • You’ll know exactly how much home you can afford, which makes it easier to find

the right home for you. • Gives an advantage over other buyers, since sellers know you have bank

approval for a loan. • Helps you make a smart financial choice on a home, rather than a risky,

emotional one.

Not Planning For Additional Costs Many first-time homebuyers assume that their monthly mortgage payments are the only cost of a home, but there can be additional upfront and ongoing costs with a mortgage.

Upfront Costs • Down payment – usually between 3.5% for an FHA mortgage and up to 20% for a

conventional mortgage. • Closing costs, which can include appraisal fees, escrow fees and more and are 3% of the

loan balance on qualified mortgages. • Moving costs

Long-Term Costs • Mortgage Insurance • Property taxes and Homeowner’s Insurance • Maintenance and upkeep

Not Using a Professional Team Many buyers think they can go it alone – and some can – but a good team can save you time and a lot of money.

• Real Estate Agent – Can help navigate difficult sellers, tricky agreements and large home

inventories. Ask your loan officer and friends for references. • Loan Officer – The loan officers at New American Funding are trained to help get you

the best rates on a loan and to assist you in gathering vital loan documents. • Lawyer – Not every home purchase requires a lawyer, but they can be counted on to

offer independent advice and legal protection.

Not Building a Budget with Savings It’s not uncommon for a buyer to exhaust their savings with a large down payment and be left with no reserves. How to Build A Budget • Start with pre-approval to know how big your

down payment will be. • Once you have loan approval, check the Good

Faith Estimate from your lender to see estimated charges.

• Balance the long-term cost of mortgage insurance with the benefit of a smaller down payment.

• Remember, it’s more important to be ready for a rainy day than to have smaller mortgage payments.

Not Managing Expectations We know that buying a home is an emotional experience, but it’s important to keep expectations at a manageable level to avoid making rash decisions or rushing into a home you’re not prepared to pay for. Sometimes your exact dream home isn’t available at the moment, so here are a few ways to make sure you don’t get in over your head. • Don’t feel pressured by an agent – if you can’t stick to your preapproval amount, don’t try to

stretch your finances. • Remember that your wish list is for wishes. You might not be able to get everything on your list, so

focus on must-have items, and then prioritize additional features like a patio or a parlor room. • Wait to get excited until after a home inspection. If you start planning your life in a beautiful home,

only to find problems in the inspection, it can be easy to dismiss them due to an emotional attachment. Keep a level head, and you’ll make a smart decision!

First-Time Homebuyer Mistakes And How to Avoid Them

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