Buying your first-time home is a daunting process! Unfortunately, many experience the same common first-time home buyer mistakes – leading to trouble. By identifying the more common errors and planning around them, you are likely to avoid making these mistakes.
Rushing the Process
Buying a house in today’s market is not as simple as finding a home and purchasing it. Instead, buyers should take the time to research; with areas of focus on local market, preferred neighborhoods, and a budget.
We recommend planning to begin the home buying journey at least a year in advance. This timeline will allow you the necessary time to research, plan, and save for the complex buying journey. Three financial things to do during this time are work towards boosting your credit score, paying down debt, and saving for a down payment.
Using Up Your Savings to Pay Down Payment
One common mistake new home-buyers make is to drain their savings to purchase a home, using the funds to pay the down payment and closing costs. The idea that you need a 20% loan is outdated. But, of course, the more you pay for a down payment, the lower your monthly payment, and with increased equity and better rate—if you can afford to do it, it’s something to consider.
However, if paying the 20% down will drain your savings account, you’re better off paying a smaller percentage on the down payment and retaining that money for your future. For example, with a conventional mortgage with PMI, you can put down as little as 3%, and with an FHA loan, you could put down only 3.5% if your credit score is 580 or higher.
Did You Know? According to the National Association of Realtors, the median down payment on a home is 12 percent and 6 percent for first-time buyers.
Getting a Singular Rate Quote
Researching your mortgage is just as important as analyzing the real estate market. Don’t just take the first and only quote you get; you need to compare offers! Mortgages vary from lender to lender, so you’re more likely to find the best deal by shopping around.
Not Being on Top of Your Credit
As part of the mortgage process, lenders will pour over credit reports to decide interest rate and whether or not to approve you for a loan. If there are inaccuracies in your credit report, you could be penalized with a higher interest rate. By checking your credit, you will know your loan eligibility, and you can correct any errors, saving you money in the long run.
Additionally, don’t do anything drastic with your credit if you’re planning on purchasing a house: don’t open new cards or close existing accounts, and don’t take out any other loans. While you can save the new appliances and furniture to your shopping cart, you shouldn’t purchase them until after closing.
Did You Know? You may request a free credit report each year from each of the three main credit bureaus.
Focusing Solely on the Home & Not the Neighborhood
When you purchase a home, while the actual structure itself is important, the neighborhood and its location are just as important. Therefore, you should always research and check out the general area to make sure it’s a good fit with your lifestyle and priorities.
Underestimating the Costs of Home Ownership
Not only is buying a home expensive, owning a home is costly. There are different costs associated with being a homeowner, such as property taxes, mortgage insurance, homeowners insurance, hazard insurance, repairs, maintenance, utilities, and more!
If you’re not prepared for these costs, they can quickly add up and overwhelm a new buyer. We recommend setting aside some funds every year, specifically for repairs and maintenance.
Forgoing a Home Inspection
We understand how tempting it can be to forgo a home inspection, especially when you are vying for the coveted accepted offer status amongst hoards of other buyers; however, we always recommend getting a home inspection. By choosing not to include this contingency, you are entering into the unknown where various things could go wrong with essential components in the home.
Around 86% of home inspectors find at least one necessary repair during their inspection—that’s a lot of repairs! However, the inspection report will be an asset to you in the long fun, protecting your wallet and ensuring your future home is livable.
Making Emotional Decisions
Buying a home is an emotional process; however, you’ve entered dangerous waters when you allow emotions to guide you in your decision-making. Of course, there should be some emotions involved, but it’s a massive investment. Allowing yourself to get overly attached or emotional will only hurt you and your wallet in the long run.
It’s better to be very logical, rational, and practical. Create a list of needs vs. wants, have a budget that you’ll stick to, and turn to your real estate agent if you can feel your emotions starting to take over.
Hiring the Only Real Estate Agent You Meet
We recommend not hiring the first or only real estate agent you meet (even if it’s one of our agents). An experienced buyer agent will be able to help you in all aspects of home buying and set you up for a smoother transaction. It’s a significant relationship, and putting all your eggs into one basket, might hurt you in the long run if you determine later on you and your agent aren’t the best fit.
You may click with the first agent you meet, but we recommend meeting with a few to determine which agent will work best with you and has the expertise you’re searching for. If you’d like to meet with one of our agents regarding your buyer’s journey, reach out!
Don’t let these first-time home buyer mistakes get you down, instead plan ahead! If you have any questions regarding these mistakes and would like a more in-depth explanation of how to avoid them, contact us; we’d be happy to help.
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