What Not to Do for First-Time Homebuyers

The hardest part of home buying is saying "no." The job of realtors and loan officers is to get you to say "yes," and they tend to be very good at it. The pressure only intensifies when you fall in love with a house. But saying "yes" too hastily can lead to some big mistakes, such as overlooking these five mortgage no-nos.

When you apply for a loan, the first thing a lender looks at is your credit report. A poor credit score may cause your application to be denied, or the loan's interest rate to be increased. Beat your lender to the punch-check your credit report before applying. If you find errors, they can be removed and your score will increase. If your score is low because of bad credit, you may want to delay your application. After six months to a year of making payments on time, your score will likely improve.

Lenders and government agencies offer numerous programs for first-time homebuyers. They're designed to help a wide range of borrowers, including people with poor credit or little savings. Research the various programs. Call lenders, check with local government housing offices, and scour the Internet. You'll be amazed at how many programs you'll find.

First-time homebuyers are often approved for more of a mortgage than they can afford. Before you accept a super-sized loan, figure out a realistic monthly payment. Factor in everything from retirement savings to grocery bills. A little budgeting now will prevent trouble down the road.

First-time homebuyers tend to be naïve. They choose the first lender who approves their loan application, afraid that they won't be accepted elsewhere. The truth is that many lenders will bend over backwards for your loan. Instead of cowering before a loan officer, do some comparison shopping and find yourself the best rate in town.

Unscrupulous lenders may fail to disclose fees during the application process. Instead, they wait until the closing, and inform the borrower that, in order to drop the fees, the loan will need to be rewritten. Avoid the problem by scrutinizing your Good Faith Estimate, which includes all the fees and costs, before signing a loan application.

It's not easy being a first-time homebuyer. There's much to learn, and when you find the house you really want, you feel pressured to make quick decisions. Just remember that a hasty "yes" means a mortgage no-no could be overlooked. It's an error no homebuyer-rookie or otherwise-can afford to make.