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How to's and money-saving tips from resident homeowner and mortgage professional, Cathy West

First-time homebuyers have a lot to learn before they start house hunting.

Avoid these first-time homebuyer mistakes to house hunt like a pro

As a potential first-time homebuyer, you're likely full of excitement and anxiety as you get ready to house hunt. You want the property of your dreams, but you don't want to have any missteps along the way.

The homebuying experience is tedious and complex, but by the end you'll have a house you love. Here are some tips to help you get from A-Z smoothly, avoiding common mistakes first-timers make:

Going it alone
With the internet, you can find information on anything. So after reading a few articles on the homebuying process, you may believe you're an expert on completing the endeavor. Researching ahead of time is great. However, it's also important to assemble your support system.

Here are a few individuals who can help you along the way:

  • Real estate agent: Combing through listings to find applicable properties and setting up appointments to see the homes takes time, which you may not have between work and other responsibilities. Plus, you'll likely need a helping hand with paperwork and negotiating that comes with buying a home. A real estate agent is your guide for these endeavors. Find an agent who knows the neighborhood where you want to live. Also, don't work with a seller's agent. You want someone who will advocate for only you when it comes to negotiating the sale price.
  • Lender: Mortgage applications aren't light reading, so you'll likely have a few questions. Whether you're trying to decide between a fixed- or adjustable-rate mortgage or inquiring about what a Closing Disclosure form is, a lender can bring you up to speed. Find a lender before you start looking at homes.

Forgoing a mortgage preapproval
Before you start looking at homes, you need a clear idea of how much financing you can obtain. Once you find your lender, get preapproved for a home loan. This check includes nearly as much scrutiny as you'll receive with the full application process so your lender can provide you a letter detailing the mortgage amount you can receive.

Not only does this letter help you determine your price range, but it also provides leverage in bidding wars. When sellers have a number of viable buyers, your preapproval letter can give you a leg up by showing your financial capability.

Forgetting costs beyond the mortgage
When rent prices are on the rise, many news stories, friends and family members may say you're better off buying instead of continuing to rent. While these sources are usually accurate when it comes to comparing a mortgage payment to average rent, the analysis sometimes excludes other expenses that go along with owning a home.

Here are a few other costs to take into account:

  • Mortgage insurance: If you have less than 20 percent saved for a down payment, you'll likely have to cover the cost of mortgage insurance. This coverage insulates your lender in case you default on your loan. The good news is this expense can go away when your loan-to-value ratio reaches 80 percent.
  • Property taxes: See what this cost looks like for the county you want to live in. Also, account for the possibility of your tax rate increasing over the years.
  • Utilities: While renters sometimes pay for electricity and gas, they often catch a break on water and trash collection. As a homeowner, you're usually responsible for all of the utility bills.
  • Home maintenance: When you live in an apartment, you call your landlord or property manager if something in the unit breaks. Homeownership means you have to fix these issues yourself or find the right professional for the job, not to mention pay all the expenses associated with the endeavor. Also, think about regular maintenance, like lawn care and snow removal.
  • Homeowner's or condo association fees: These organizations help keep your neighborhood or building safe and presentable, offering maintenance services and guidelines to maintain the area. These benefits come with the cost of a monthly fee paid by homeowners.
  • Homeowners insurance: Fires, theft, severe weather and other issues can befall your home. You'll need coverage to safeguard your finances when these disasters arise.

Taking on more loans before closing
While a new car may seem like the perfect complement to your first home, don't make this purchase while you're in the process of closing on a property or even in the few months preceding your house hunt. Your lender reviews your credit report more than once during the mortgage process. A final check occurs right before closing, and any new loans taken out since the earlier reviews could impede your ability to obtain financing for the home.

While some of these scenarios appear tricky, don't forget to lean on your lender and real estate agent. These resources will help you avoid these mistakes and any others you could make as a first-time homebuyer.

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