4 big money mistakes of first-time homebuyers
Choosing the wrong mortgage product
First-time homebuyers today typically opt for a 30-year fixed-rate mortgage. Their conservatism is a reaction to stories about the dangers of interest-only mortgages and adjustable-rate mortgages.
But Harrison says home loan alternatives to a 30-year-fixed sometimes make more sense. For example, buyers certain they will be relocated by their companies within five years may find a 5/1 ARM "could be a much better mortgage," he says.
"There's no reason to pay a premium for a product you don't need like a 30-year loan," Harrison says.
Homebuyers eager to build equity in their homes or who are older and want to live mortgage-free in retirement should consider a 15-year fixed-rate loan or, if they can afford it, even a 10-year mortgage to reach their goals.