INDIANAPOLIS, Ind.- One of the most common mistakes first-time home buyers make is buying more money than they actually need, or can afford to pay back.
“The danger in all of this is everyone in the process will let you go over, everyone in the process will encourage you to go over,” said Pete the Planner, a local financial expert.\
Remember the sub-prime mortgage crisis about a decade ago?
That in part was caused by lenders approving borrowers for way more money than they could afford to pay back, and that resulted in many of those lenders defaulting on their loans.
Financial experts say figure out your budget early in the home buying process and make sure you stick to it.
Another mistake a lot of first-time buyers make is purchasing a “fixer-upper” home and not realizing the remodeling or renovation costs.
This is often seen as a cost-saving move, but it can actually turn out to be just the opposite.
“Stuff is going to break, and you’re going to go into debt and then you’re going to be under water with your mortgage—you’re going to owe more on it than it’s worth,” said Pete the Planner.
Last but certainly not least, experts say do not deplete your savings in order to afford a down payment on a house.
Draining your emergency fund can leave you in a bad position if an emergency pops up in your life.
Financial experts also advise against borrowing money from family and friends for a down payment.
“You’re also tricking yourself into thinking you can afford something you can’t. If you wouldn’t qualify for something without someone else’s help, then you wouldn’t qualify,” said Pete the Planner.