The mortgage and real estate finance industry is bracing for the arrival of the next generation of new homebuyers. TransUnion, the credit bureau, estimates that as many as 17 million new homebuyers will emerge over the next five years. While that will not only be a boon to the industry and the economy (not to mention the new homeowners accumulating equity instead of paying rent each month), how ready are these soon-to-be home shoppers? Do they understand the complex and highly-regulated mortgage market? According to a Fannie Mae survey, 40% of consumers say they “don’t’ know” about what minimum downpayment requirements are.
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Additionally, 54% aren’t aware of minimum credit scores, and 59% don’t know enough about debt-to-income ratios. So, let’s just say that Millennials and other prospective first-time homebuyers could use a few tips on buying a home.
In addition to working with a trusted, experienced, professional real estate agent and mortgage loan originator, Zillow has three big pitfalls to avoid:
Don’t go it alone!
One of the worst mistakes you can make as a first-time homebuyer is to equate clicking through listings on Zillow or another service to making a successful offer on a home. According to Zillow, roughly 46% of buyers did not get the first home on which they made an offer. In today’s market, it is likely that you will face challenges, including multiple-bid scenarios (a.k.a. a “bidding war”) or the deal may fall through at the last minute. It pays to have a professional on your side. Remember that the commission you pay your agent will be money well spent when you’ve successfully navigated your way to a new home.
Don’t shop beyond your price range.
One of the most important things you can do is get pre-qualified. Without a rough estimate of how much you can afford, window shopping for homes could lead to major disappointment when you find out you can’t afford that perfect home (the one with a pool, updated kitchen, and brand-new flooring). You wouldn’t head to the mall with no idea how much money you have in the bank, right? Find out how much home you can afford first, then go shopping with confidence!
Don’t skip shopping for the right mortgage.
A major mistake that some buyers make is spending weeks or months shopping for homes, and then accept the first mortgage quote they receive. Just like it pays to shop for homes, it pays to shop for a mortgage.
Want to read more? Here's the original article from Zillow.
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