Rising mortgage interest rates and an inventory shortage have made buying a home in New Jersey more difficult in recent years, but there are still deals to be had for those who are prepared to do a little homework. There are also a number of pitfalls that first-time home buyers should avoid. One of the biggest mistakes that home buyers make is not anticipating all of the costs they will face. People who have purchased homes in the past expect to pay closing costs and know that their property taxes could increase, but first-time home buyers are sometimes surprised by these expenses.
Most home buyers obtain mortgage preapprovals before they start to look at properties. Doing this tells them how much they can borrow and how much their monthly mortgage payments are likely to be, but it does not inform them about all of the fees they will have to pay. Closing costs in a real estate transaction usually range from 2 percent to 6 percent of the property’s purchase price, which can be a lot of money in a state like New Jersey where home prices are fairly high. Some of these expenses are negotiable, and the seller may agree to pay some of the closing costs to make a deal.
Credit scores and property taxes
First-time home buyers often take steps to improve their credit scores before they venture into the real estate market, but sometimes they do more harm than good. Closing accounts can cause credit scores to drop, and this is especially true if credit card balances are consolidated before accounts are closed. Property taxes may increase after a home is sold, so it is always a good idea to ask the seller if they have any exemptions. Another expense that catches first-time home buyers off guard is private mortgage insurance. Sellers require this coverage when home buyers put down less than 20 percent of a home’s selling price, and it can be as much as 1.5 percent of the loan amount.
Buying a home for the first time can be an exciting experience, but unexpected costs, property tax surprises and lender fees can make the process less enjoyable. If you are thinking about buying your first home, you should ask plenty of questions, anticipate unforeseen expenses and avoid making mistakes that could lower your credit score.