by Chelsea Springli 
Buying a home is a major purchase, to put it mildly, and there are plenty of ways to trip up. There are lots of steps you need to take to ensure your home buying experience is the best it can be. This can be one of the most stressful buying processes you go through, but don’t worry, here are some helpful tips to get you prepared.
Mistake 1: Having Too Much Outstanding Debt
If you have too much debt, it won’t be as easy to qualify for a mortgage. Lenders evaluate your DTI, or debt-to-income ratio, to determine how risky it is for them to lend your money for your mortgage. Having too much debt versus your expected income is a red flag that you won’t be able to afford your payments.
Solution 1: Reduce Your Debt to Income
At least six months before wanting to purchase a home, you should focus on paying down debt. To reduce your debt to income, eliminate the amount of money you have to spend on your minimum monthly payments. The snowball debt payment method is likely the fastest way to accomplish this feat. Also, get your credit on track so you have some wiggle room for unexpected costs that come during the homebuying process.
Mistake 2: Miscalculating How Much You Can Afford
Before you start thinking about kitchen appliances and how many bedrooms you need, it’s important to determine how much mortgage you can reasonably afford. The worst mistake you can make is buying too much of a home that could put yourself and your family into a terrible financial situation.
Solution 2: Create a Manageable Plan
Committing to a mortgage shouldn’t be taken lightly. Miscalculating how much you can afford can be detrimental to your finances and stability. Sit down with an Alltru Credit Union Certified Credit Union Financial Counselor to discuss your finances and make a plan.
Mistake 3: Not Having Your Financing Ready When You Make an Offer
If you want a house, and you love it, you don’t have any time to waste. A major step back could be not having your finances in order, which consists of more than just the mortgage, you also need to consider your down payment, and how much you’ll need to budget for the potential financial difference between your current home and new home.
Solution 3: Get Your Money Ready
Your money shouldn’t be stuck in a Certificate of Deposit since you’ll have to pay fees if you withdraw early. If you are withdrawing money from a retirement account, you might have to pay taxes up front. Your financial counselor can help you make sure you have your money in hand when you need it. Make sure to start this conversation when you’re a few months away from seriously browsing the housing market.
Mistake 4: Using Your Emergency Savings Account for a Down Payment
When it comes to buying a home, the more you have in savings, the better. But the money you’re putting away for a down payment shouldn’t come from your primary savings account. It’s a huge mistake to buy a home and completely liquidate your savings account with nothing to fall back on. If you were to have an emergency shortly after buying a home, you’ll be left in an extremely vulnerable situation and might have to rely on additional loans.
Solution 4: Separate Your Savings
Instead, you should establish a separate savings account like Alltru’s High Yield Online Savings account to put extra money away for the down payment. That way, it’s clear how much money you have saved for a down payment and how much money you have saved for an emergency.
Mistake 5: Forgetting About the Added Costs
Buying a home isn’t just a matter of replacing a rental payment or smaller mortgage payment with a much costlier mortgage payment. There are also maintenance costs, utilities (which will likely cost more) and property taxes. We tend to forget that with a bigger home comes more costs in utilities, with a new location, comes a larger cost for taxes and an increase in insurance.
Solution 5: Get a Second Opinion
First time home buyers are more prone to make this mistake due to inexperience. Ask other homeowners what costs they forgot about when buying a home. Some of these expenses will be ongoing, including utilities and HOA fees. Others may be one-time costs, including U-Haul rentals, closing costs, and an escrow. Save for these expenses so you don’t have to pull from your emergency savings to cover the cost.
Buying a Home Can Be Both Exciting and Daunting
But because there is so much on the line, financially speaking, you’ll want to make sure that you do your research. This will help you to avoid these costly mistakes and help you fully enjoy your new home.
