The following are the four common first-time home-buyers mistakes:
Spending the maximum on housing:
First-time buyers can be overly optimistic and excited about buying a home, so they tend to borrow the absolute maximum they qualify for (on paper), not necessarily worrying about a budget or other expenses. Lenders qualify buyers based on their incomes and debt-to-income ratios. However, borrowers have other monthly expenses they need to consider: maintenance and upkeep on their new home, utilities, transportation, savings, and other necessities that are not counted in the debt-to-income ratios.
Not getting “pre-qualified” early enough
Many first-time home-buyers start house hunting (and sometimes commit to a sale contract) before contacting a lender. This can be a time-wasting misstep if they have unknown errors or issues on their credit report.
All buyers need to get pre-qualified early enough in the process so that, if needed, they can make changes to their financial situation. For example, if an error shows up on their credit report it will take time to correct it. Be prepared and pro-active.
Misunderstanding the importance of a high credit score:
While most consumers know it’s important to have a high credit score, not everyone understands how costly a low score can be.
Simply stated, credit scores are a statistically-based tool to assess the future performance of a borrower. Credit scores have a significant impact as to what type of loan would be available which relates to the terms and interest rates. Good credit pays off.
Choosing the wrong mortgage product:
First-time home-buyers today typically opt for a 30-year fixed-rate mortgage. Their conservatism is a reaction to stories about the dangers of interest-only and adjustable-rate mortgages. In some cases, alternatives to a 30-year-fixed loan sometimes can make more sense.
If a buyer will be relocated by his or her employer in five years, there’s no reason to pay a premium for the 30-year loan when a lower rate 5/1 ARM (Adjustable Rate Mortgage) may be a much better loan product for their situation.
Home-buyers eager to build equity in their homes or who are older and want to live mortgage-free in retirement should consider a 15-year fixed-rate loan or, if they can afford it, even a 10-year mortgage to reach their financial goals.
St. Louis Mortgage Interest Rates – September 8, 2010
- 30-year fixed-rate 4.250% no points
- 15-year fixed-rate 3.750% no points
- 5/1 adjustable rate 3.50% no points
- FHA/VA 30-year fixed rate 4.375% no points
- Jumbo 5/1 ARM 3.875% no points
- Jumbo 15 year fixed-rate 4.375%
For more information or if you have questions on mortgage rates in St. Louis you may contact me by phone at my direct line, (314) 372-4319, email at rfishel@paramountmortgage.com or you can visit our company website at http://www.paramountmortgage.com.
*Note- The above rates are based upon a typical sale price of $187,500 with a 20% percent down payment leaving a loan amount of $150,000 to a borrower with a 720 credit score for a loan with no discount points charged. Rates and terms will vary depending upon loan amount, home value, credit and income of borrower.
This information is provided by this author and this site for informative purposes only and is not warranted or guarteed in any way.
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