5 Mortgage Mistakes For First-Time Homebuyers To Avoid (2024)

FAQs

What are at least 5 don'ts when buying a home? ›

Conforming loan down payments can vary from 3% to 20% or more, so for a $500,000 home, you'd need between $15,000 and $100,000. Conforming loans, once again, follow Fannie Mae and Freddie Mac guidelines and usually offer competitive terms.

How soon after closing can I use my credit card? If you already have a credit card (or opened a new card shortly after closing on a home mortgage loan) there's no need to wait before using the account.

Get preapproved for a mortgage

Getting preapproved for a mortgage is a crucial piece of buying a house in California (or anywhere, really). It shows that a lender has done a preliminary review of your finances and is likely to loan you a certain amount to buy a home.

Red Flag #1: When they offer you a rate that's lower than the APR. When a mortgage's APR is much higher than the actual rate, it means that the fees are a lot higher, too - and you'll be paying them over the life of your loan. A low rate might be enticing, but you have to consider the long-term cost.

Under the Red Flags Rules, financial institutions and creditors must develop a written program that identifies and detects the relevant warning signs – or “red flags” – of identity theft.

What is the best mortgage rule? ›

According to the 28/36 rule, you should spend no more than 28% of your gross monthly income on housing and no more than 36% on all debts. Housing costs can include: Your monthly mortgage payment. Homeowners Insurance.

But what is considered a big purchase during underwriting? A new car or boat would certainly raise red flags with lenders. Even furniture or appliances — basically anything you might pay for in installments — is best to delay until after you finalize your mortgage.

A good number to shoot for when saving for a house is 25% of the sale price to cover your down payment, closing costs and moving expenses. (This amount is separate from saving up 3–6 months of your typical living expenses in a fully-funded emergency fund—which I recommend you do first, before saving up for a home.)

How many times to look at a house before buying? Ideally, four to six viewings should be sufficient. Attending two to three visits inside, with a realtor and/or appraiser, and another two to three visits scouting the house and neighborhood independently, from the outside, may be a good approach.

Income Limits: Some first-time homebuyer programs have income limits, which means that buyers with higher incomes may not qualify for assistance. Potential for Higher Closing Costs: Some first-time homebuyer programs require buyers to use certain lenders or real estate agents.

It costs a LOT more than they say it will.

Of COURSE they're going to want you to think you can afford that bigger loan! Don't believe them. Figure out your monthly budget and go by that. In the same vein, you're going to have to pay for so much more than just the down payment.

Rounding out the regrets buyers had about their homebuying experience had more to do with preferences and pressure to buy than prices and rates and the market: “I don't like my home's location” (22%), “I don't like my neighbors” (21%), “I bought sight unseen” (18%) and “I don't like my home” (15%).