For young families and individuals, buying a house is an exciting step to take. In their eagerness to sign on the dotted line and get keys in hand, they might inadvertently fall prey to some mistakes.
Luckily, experienced real estate lawyers have helped many in your position and can draw from that experience to help you make the best decision for yourself and your family.
From Diamond Real Estate Law, here are 3 common mistakes that first-time buyers make in McHenry County, Illinois, and how to avoid them.
1. Shopping for a house before a mortgage
Before seriously considering a home purchase, it’s essential to sit down with a professional to discuss your finances. This not only can help you figure out just how much you can afford, but also the kind of loan for which you can be approved.
Many first-time home buyers make the mistake of shopping for houses based on what they think they can afford, only to find out from their bank that their credit isn’t what they thought it was. You don’t want to fall in love with a house, only to be disappointed when you find out it’s out of your price range.
Here are three ways to avoid this mistake:
- Mortgage calculator: Use a mortgage calculator to determine a price range that is best for you and your family.
- Pre-qualification: Talk to one or more lenders about pre-approval or pre-qualification. Pre-approval/qualification can make your bid more competitive because you’ll be able to show sellers that you can back up your offer.
- Talk to an accountant: An accountant or personal finance manager can help you assess your position and develop a financial plan that will get you in the right home.
2. Making a down payment that’s too large or too small
Financing your house with a down payment that’s too large can have negative long-term impacts for obvious reasons. Emptying out your savings to afford a large down payment can leave you vulnerable to unexpected expenses in the future: home repairs, insurance deductibles, monthly bills, and so on.
On the other hand, some homeowners say they regret that their down payment was too small. The smaller your down payment, the larger your monthly payments will be, and being saddled with a costly mortgage payment every month can make it difficult to afford other expenses, let alone save.
The key is to find the financing plan that’s right for you: a small enough down payment that doesn’t “break the bank,” and large enough to relieve some financial pressure down the road.
The complicating factor here is that real estate prices and mortgage rates have been rising every year , making home ownership more costly than ever. So the longer you wait to save, the more money you may end up spending in the long run as prices and rates increase.
It can help to talk this over with someone who’s on your side like a real estate lawyer, and isn’t in it to see you spend as much as possible on your ideal home.
3. Not seeking out first-time buyer loan programs
Many first-time home buyers aren’t aware of the state-sponsored special loan programs that can help them make their first purchase.
Here are three examples of these programs:
- VA loans: The Department of Veterans’ Affairs can help individuals who have served in the military make purchases with 0% down and 100% financing.
- USDA loans: The Department of Agriculture can help buyers in rural areas purchase homes with 0% down and 100% financing.
- FHA loans: The Federal Housing Administration can help low-income buyers and those with poor credit apply for loans with as little as 3.5% money down. With FHA loans, you pay mortgage insurance for the life of the mortgage, even after you have more than 20% equity.
There are various other programs in different states and regions of the country. Talk to a mortgage lender and your real estate lawyer to learn about more programs.
Contact an Illinois real estate lawyers
At Diamond Real Estate Law, our experienced real estate lawyers have decades of experience helping clients buy homes in McHenry County, Illinois. We can help you avoid these easy to make mistakes and facilitate the best purchase for yourself and your family. Contact us today to schedule a free consultation.
DISCLAIMER: Any information contained herein is solely for informational purposes. While it is important that you educate yourself, nothing herein should be construed as legal advice or create an attorney-client relationship. For specific questions, [I][We] always urge you to contact a local attorney for advice pertaining to your specific legal needs.