For most people, home buying comes only once, meaning not many can claim experience buying homes unless a person has worked in the real estate industry. As a result, many home buyers make costly mistakes. 

The first step to ensuring your home buying experience is error-free is identifying the common mistakes made by home buyers and creating a strategy to help you avoid them. This guide highlights some common home-buying mistakes you should know and what you should do before getting a mortgage.

Common Mistakes

1. Becoming Self-Employed

Lenders want to be sure that you can pay back the loan you borrow. Unless you have been in business for years and have evidence to prove your record of success with your business, securing a mortgage as a self-employed can be a challenge. 

So, if you are employed and want to apply for a mortgage soon, it is best to wait until you get approval for your mortgage before going self-employed.

2. Buying a Car

Unless you are buying the car out of pocket, getting one before you apply and are approved for a mortgage is a bad idea. Even when you can afford them, you may not qualify for a mortgage if your debt-to-income ratio does not meet the threshold mortgage lenders require. 

The best thing to do if you want a car and mortgage financing is to get the mortgage first and the car after.

3. Large Deposits 

Most lenders require an applicant to have enough to pay for their home's down payment. So you may think making large deposits in your account is a good idea. While it could be, lenders look for consistency and stability in financial dealings. 

Huge deposits can lead to suspicions, as the lender must seek to know the sources as a legal requirement. If you make large deposits, ensure that you inform your lender about the source of the money and provide documentation. 

4. Buying Bigger House Then You Need

Every person has ambitions of having the best in life. But it is important to balance that ambition with what you can afford. One of the most common mistakes home buyers make is buying a house that is too big for their needs. 

The problem with this approach is it can put a considerable strain on your finances, considering home buying means committing a part of your income to the repayment of the mortgage for a long time, and you could have other long-term expenses in the future.

So even when you could get approval for a bigger loan, it is best to buy a house within your means and upgrade to a bigger house if need be when circumstances in your finances change.

5. Underestimating the Cost of Home Ownership

Homeownership is great, but it does not come without a cost. So when buying a home, you have to ensure that your disposable income after mortgage repayments is enough to finance the needs of your newly acquired home. 

Some of the costs attached to home ownership include utility bills, home maintenance, and property taxes. According to a recent study by Zillow, the overlooked expenses of home ownership can reach as high as $9,080 a year. These costs are more reasons you should not buy a home that is larger than your needs.

What to Do Before Getting a Mortgage

1. Get Your Credit Score in Order

Lenders look at borrowers' credit scores to determine whether to approve your mortgage application. So it is best to ensure you put it in order before applying for a mortgage. 

Past mistakes such as late payments on loans and bills can last on your record for up to ten years. But you can improve your credit rating by undoing the wrongs, for example, by making payments for bills and other financial obligations before due dates. 

Also, you may want to avoid incurring credit card debts. Improving your credit rating is not something you can do overnight, so you have to make these improvements with time.

2. Use a Mortgage Calculator to Know the Cost of Your Mortgage

Before calculating your mortgage, ensure that you choose the lender with the best rates. Once you settle on a lender, the next step is determining how much your mortgage will cost you. The mortgage cost will depend on several factors, such as the interest rates, the repayment period, and the down payment. 

It is possible to determine the impact each of these factors can have on the cost of your mortgage using a mortgage calculator for comparison. Based on the results you get, you can then pick the best combination based on your ability.

3. Get Pre-Approved

If your finances are in good shape, a lender will have no qualms pre-approving you for a mortgage. A pre-approval is more of a creditworthiness confirmation from a lender to a home seller. 
With a mortgage pre-approval, the process of home buying can be bliss. Also, it can help you lock your interest rates with your lender, meaning that the lender can adjust your rates mid-way.

Author: Sari Cada