The 5 Biggest Mistakes First Time Homebuyers Make
Becoming a homeowner is a significant milestone, but it's important to avoid common pitfalls that can hinder your journey. Here are five mistakes that first-time homebuyers often make.
BC
by Brandon Carrero
Who is Brandon Carrero?
Experience
Over 20 years of expertise in the real estate mortgage market, Brandon provides expert mortgage advice to first-time homebuyers.
Knowledge
With a deep understanding of financing, investor aspects, and market trends, Brandon offers invaluable guidance throughout the home buying journey.
Dedication
Committed to helping clients achieve their homeownership goals, Brandon provides highly personalized support every step of the way including down payment assistance.
Mistake #1: Transition From W2 Employed to Self-Employed
W2 Employed
Stable income, consistent paychecks, easy to verify. However, in the gig economy working 2 jobs for less than 2 years is likely unstable income.
Self-Employed
Fluctuating income, inconsistent paychecks, difficult to verify. Need 2 years of working as self-employed to qualify for a mortgage.
Loss of Income
Lenders may require additional documentation and income verification, potentially delaying or rejecting the application if you change from W2 to Self Employed.
Mistake #2: Opening New Lines of Credit or Becoming a New Cosigner
New Credit Lines
You will drop your credit score and increases your debt-to-income ratio.
Cosigning is Risky
You become financially responsible for another person's debt, potentially jeopardizing your own financial stability.
Mortgage Denial
A lower credit score and higher debt-to-income ratio can make it more difficult to qualify for a mortgage.
Mistake #3: Depositing Cash in your Account
No Cash Deposit
Large sums of cash can be suspicious, as lenders need to verify the source of the funds to comply with anti-money laundering rules.
More Questions
Lenders will ask for documentation to explain the source of the cash deposit, such as bank statements or pay stubs.
Loss of Money
If the source of the funds cannot be adequately explained, it will not be counted in your mortgage transaction.
Mistake #4: Transfers Such as Zelle or From Other Accounts
Recent Transfers
Large transfers can raise concerns about the source of funds, especially if they occur shortly before applying for a mortgage.
More Digging
Lenders may ask for documentation to explain the source and purpose of recent transfers, such as bank statements or receipts.
Underwriting Trouble
If the transfers cannot be adequately explained, it may delay or prevent mortgage approval.
Mistake #5: Making a Late Payment on Credit by an Authorized User
Authorized User
Even if you are not the primary account holder, a late payment on an authorized user account will negatively impact your credit score.
Primary Account Holder
Your credit score drops and can have a lasting impact preventing you to purchase a home for years.
Bonus: Always ask for Down Payment assistance
Down Payment Assistance
There are many programs that can help with down payments, but eligibility and availability vary. It's important to thoroughly research your options.
Thorough Research
Understanding the specific criteria and application process for different down payment assistance programs is crucial for a successful home purchase.
Mortgage Planning
Saving diligently towards your down payment or closing costs is an important part of the home buying process. Be realistic about your financial goals.
Ask Brandon…
How do I get Down Payment Assistance?
It's natural to have questions about the home buying process. Brandon Carrero, NMLS 314143 is an Equal Housing Lender who is here to provide comprehensive answers and address any concerns. Don't hesitate to ask!
