Buying a home for the first time can be an exciting and overwhelming process. There are so many things to consider, and it is easy to make mistakes. To help you navigate this cumbersome process, our title agency in New Jersey wants to highlight some common mistakes first-time homebuyers in New Jersey need to avoid:
- Not Getting Pre-Approved for a Mortgage: There are many things to consider when buying a home, especially if it’s your first time. Pre-approval is one of the most critical steps in the home buying process. The pre-approval process helps you calculate how much you can afford to spend on a home which helps narrow your property search. Keep in mind that partnering with a title agency can make your real estate closing go smoothly so finding one during this period of time can be helpful.
- Not Researching the Neighborhood: It’s essential to research the neighborhood you’re considering before buying. Ask your real estate professional for feedback and advice. They should be very familiar with the area and will help you make a choice that fits your budget and lifestyle. Keep in mind that it would also be beneficial for you to understand the differences between a deed vs. a title during this process.
- Not Knowing Your Credit Score: Your credit score is one of the most critical factors in determining what kind of mortgage you qualify for. Be sure to check your credit score before you start shopping around for a mortgage. Your score directly impacts how much you can borrow for your home.
- Not Saving for a Down Payment: One of the biggest mistake first-time homebuyers make is not having a large enough down payment. A down payment is the upfront money you put towards your home, typically 20% of the purchase price. For example, if you’re buying a $250,000 home, you would need a $50,000 down payment. Not having a large enough down payment can cause you to pay private mortgage insurance (PMI), which is an extra fee added to your monthly mortgage payment. PMI protects the lender if you default on your loan. The good news is that once you reach 20% equity in your home, you can cancel PMI.
- Skipping or skimping on the home inspection: Most lenders will require a home inspection just like they require title and home insurance. They use these tools to protect their interest in the property. However, first-time buyers may face issues if they don’t finance the property through a bank. Maybe they are purchasing the property outright or taking advantage of owner financing. A home inspection can save you from making a purchase you will later regret because of problems you didn’t know about.
- Failing to Consider the Total Cost of Homeownership: While the monthly payment might seem very doable, you need to add property taxes, insurance, upkeep and maintenance costs. Your cost may be beyond what you are prepared to spend. Calculating this upfront will help you avoid surprises later.
- Not Hiring an Experienced Realtor: Realtors know their market and are happy to help you select a property that meets your needs and will guide you through the entire home buying experience.
- Declining Title Insurance: For many of us, title insurance is not an option, but it can be required. If you have a loan, your bank will require title insurance, just like home insurance. If you are paying for the property outright or using private financing, you should still elect to purchase title insurance to protect yourself against a defective title.
- Not getting multiple quotes for home insurance: Similar to title insurance, lenders require you to insure the home you are purchasing so that they can protect their investment if there is a loss on the property. If you are paying for your home with cash or other nontraditional financing, you should still elect to insure your home to protect your investment. Additionally, get several quotes from different carriers to find the home insurance coverage and pricing that meets your needs.
Following these steps and listening to the advice of the professionals you have assembled for your home buying process will help you avoid many problems first-time buyers encounter.
Cortes and Hay have been helping first-time New Jersey homeowners secure their dreams for over 50 years. Don’t hesitate to contact us today if you have questions about homeownership.