Perspectives

Buying a Home for the First Time? Here’s How You Can Avoid Costly Mistakes

a couple looking at their options before buying a homeIt is common for many first-time homebuyers to get into the process of a home purchase without thinking of the small decisions that go along with it. Failure to do so can lead to costly mistakes, which can lead to an increase in your monthly payments.

Fortunately, it is possible to avoid some of the common mistakes by considering these suggestions:

Set and stick to a budget.

Determine how much mortgage you can afford and talk about this with your lender. Mortgage companies like Mortgage Investors Group note that one important part of being a successful homeowner is making sure that you or your income can meet the estimated future monthly payments.

Know the closing cost.

Buying a home requires you to pay for a down payment and closing costs. The latter can cover about 3% to 7% of the mortgage amount. These may also include other charges such as appraisal fees, loan origination, and title insurance.

Add PITI in your budget.

PITI refers to principal, interest, tax, and insurance. You can use a mortgage calculator to determine how much principal and interest you’ll pay every month. You can also talk to your lender about the other fees included in your mortgage payment.

Consider payment of PMI.

If you cannot make a down payment of at least 20%, you may be required to pay private mortgage insurance (PMI). Ask your lender about this to determine how it will affect your monthly budget and payment.