Buying your first home is exciting! But it can also be quite intimidating if you don’t feel completely prepared. At Pineywoods Mortgage in Tampa, we’re passionate about helping people finance the purchase of the home of their dreams, and we’ll help you at every step of the way to understand the home-buying process, your complete financial situation, and how much house you can realistically afford. In today’s blog, we’ll discuss some of the “Do NOTs” of homebuying — the most common mistakes made by first-time home buyers that you should strive to avoid. Read on to learn what NOT to do when purchasing your first home!

Looking at homes before applying for a mortgage.

Looking for a home before applying for a mortgage is shortsighted on two fronts. For one, you’ll have much less of an accurate idea of how much house you can afford and what types and quality of mortgages you’re even qualified for. This is a huge factor that, frankly, should guide your home-buying decisions in the first place. Second, you lose out on the power of pre-approval when you look at homes before applying for a mortgage. In a competitive housing market like Tampa, where there’s often more buyer demand than affordable homes available, pre-approval is often a necessity if you want to secure a property.

Obsessing over the house rather than its location.

It can be easy to fall in love with a home with all of the amenities and little things on your wishlist, but it can be just as easy for a seemingly dream home to turn into a nightmare if it’s situated in a crummy neighborhood you hate. Location is incredibly valuable in real estate because of just how much of an impact it can have on homeowners’ quality of life. Instead of prizing a dream home for granite countertops, natural light, or a perfect backyard, pay much closer attention to the crime ratings, school quality scores, and the commuting and public transportation situation for the neighborhoods of prospective homes.

Assuming you need a 20% down payment.

While having enough money for a 20% down payment can help you avoid paying for mortgage insurance (at least for conventional home loans), it’s not a realistic option for most home buyers on the market today. Delaying buying a home until you have enough money for a 20 percent down payment could take years and tie up cash that would be better suited for retirement or paying off debt. There are plenty of other mortgage options out there that don’t require a 20 percent down payment, including federal loan programs!

Overlooking federal loans.

Many people are struggling to avoid homeownership in today’s economy, where real wages haven’t risen in decades and prices for food and housing just seem to keep rising unabated. However, don’t fall into the trap of thinking that just because you don’t have much saved for a down payment or you don’t have the best of credit that you can’t afford a home. Federal loans have made homeownership possible for thousands of Americans, and they could make it possible for you too!

Instead of resigning yourself to renting, look into one of the three main government-insured loan programs — Federal Housing Administration (FHA) loans, U.S. Department of Veteran Affairs (VA) loans, and the U.S. Department of Agriculture (USDA) loans.

FHA loans require a down payment of just 3.5% and a minimum credit score of just 580. FHA loans can help you close the financing gap if you have little in savings or a poor credit history. The drawback to FHA loans, however, is that they require you to pay for mortgage insurance, both annually and upfront at closing.

If you’re a veteran or active-duty service member, or the spouse of one, VA loans can be a fantastic resource. VA loans don’t require a down payment, though you may be required to pay a funding fee if you elect not to put any money down. VA loans are offered through private lenders, and there are several legal limits on how much lenders, real estate agencies, and others can charge you in closing costs and other fees in order to keep your loan affordable.

If you’re buying a home in a rural area, USDA loans could help you close your financing gap. In order to qualify, you must purchase a home in a USDA-eligible area and fall under certain income thresholds. Some USDA loans do not require a down payment from eligible borrowers with low income.

Draining your savings to avoid mortgage insurance.

One of the biggest mistakes you can make when purchasing your first home is to spend all or most of your savings on your down payment and closing costs. While it’s true that under the terms of a conventional loan, you’ll avoid having to purchase mortgage insurance if you’re able to put 20% down, you don’t want to put yourself on the financial edge in order to reap those savings.
Instead, we recommend you put aside an emergency fund large enough to potentially cover three to six months of living expenses. It’s not ideal to have to pay mortgage insurance, sure, but it’s even less ideal to leave yourself with little to no savings or emergency money in order to make a large down payment.

Overlooking the “other” costs of homeownership.

As we discussed in our blog on mortgage calculators, there are many costs to homeownership beyond your monthly payments that you should factor in to your financial planning to avoid unpleasant surprises. In addition to the costs associated with moving to and furnishing your new Tampa home, you should also expect to pay about $2,000 annually on home maintenance. Failing to have enough cushion in your monthly budget could put you in debt quickly if you’re not on top of things.

For advice on the financial aspect of home purchasing and ownership, call Pineywoods Mortgage! We’re a local broker that knows the Tampa market better than the big brands, and we’ll help you understand all the aspects of home finance so you can purchase your first home quickly and confidently. Reach out today!