One of the most misleading issues in buying a new home is that the mortgage is the most important thing to consider. While the mortgage type, interest rates, and payments are essential to consider, there are other factors to consider as well.
First time home buyer loans by experienced, customer-focused lenders are typically well explained. These lenders provide handy online tools and calculators that help buyers to understand the full cost of homeownership. However, if buyers choose not to use them, there are some common mistakes about finances that can create problems over the short and long term.
Not Understanding the Benefits of a Larger Down Payment
Many first time home buyer loans, particularly those from the FHA and the VA, offer qualified applicants the option for a very low down payment or no down payment at all. While it may seem evident that no or low down payment allows for lower upfront costs of homeownership, it fails to consider the increase in monthly payments over the duration of the loan to make up the difference.
With a 30 year fixed, which is the most common option on the market, this can really add to the cost of the loan. Using calculators to see the differences in a 5, 10 15 or 20 percent down payment is important.
Taking on High Monthly Payments
Even if a preapproval indicates an amount the buyer will qualify for, this doesn’t mean the buyer can actually afford this amount in first time home buyer loans.
Buying more house than an individual or couple can afford due to a high preapproval amount is a common error. Take a close look at the income, current expenses, the costs of homeownership outside of the mortgage and taxes and develop a realistic home price based on your financial ability to make paycalculatorsments and still have money to save and maintain the home.
At Guaranteed Rate, we provide calculators and resources for those looking for first time home buyer loans. To talk to our lending experts or to find out more, see us at Guaranteed Rate.
