Thinking about buying your first home?
The prospect of a home-search can be exciting, but many first-time buyers get ahead of themselves. Before you start bookmarking your favorite listings and spending every weekend at open houses, pause and take note of these first-time buyer mistakes and how you can avoid them.
Mistake 1: Not Considering All Expenses
Many first-time buyers begin their house hunts because they feel as if they are ready to take on a mortgage payment. However, just because you can afford a mortgage doesn’t mean you can afford to own a home. Property insurance, taxes, homeowners association dues, higher water and electric bills, and maintenance costs are just some of the expenses that first-time buyers tend to overlook. It is also important to keep in mind that property taxes and insurance tend to go up every year. Even if you can afford the costs now, ask yourself if you’ll be able to cover the increased costs later on.
Mistake 2: House Hunting First, Loan Hunting Later
Whether you’re buying your first home or your fifth, the home buying process doesn’t begin with house hunting – it begins with mortgage prequalification. First-time buyers are often hesitant to get prequalified for fear that the lender may tell them that they don’t qualify, or that they may qualify for a smaller loan than expected. Even though house hunting is more fun than filling out loan paperwork, falling in love with a house and then applying for a loan is a backward approach that could potentially lead to heartbreak. In today’s competitive market, most sellers will require that proof of preapproval be submitted with your offer. Cover all your bases: get pre-approved and then start your house hunt.
Mistake 3: Not Seeking Help from a Professional
Everyone benefits from working with an experienced real estate professional, but it’s especially important for buyers navigating the market for the first time. Jumping headfirst into the process alone, without professional guidance, is not a good idea. Generally, first-time buyers should avoid dealing directly with a listing agent. A good buyer’s agent will have your best interests in mind and will give you truly independent advice. Your agent can also refer you to other professionals, such as mortgage brokers and lawyers, whose help you may need during the home buying process. Your buyer’s agent will be able to walk you through each step of the process, from starting out your search to closing on your dream home.
Mistake 4: Using Up Savings on the Down Payment
First-time buyers may think that scraping together all of their savings to make a 20 percent down payment is the best way to go, but it is a financial decision that could leave them in quite a predicament down the road. It is true that a 20 percent down payment means buyers don’t have to pay for mortgage insurance, but draining your savings to avoid that extra monthly payment is risky. Owning a home comes with a fair share of unknowns – emergencies such as a burst pipe or broken window can leave homeowners with unanticipated repair costs. If you’ve used up all of your savings on the initial down payment, that surprise busted water heater could leave you taking cold showers until you’ve saved up enough for a replacement. Consider making a smaller down payment and reserving some of your savings as a rainy day fund. Want more information on low or no down payment loan options? Visit my blog post on the subject here.
Mistake 5: Getting New Loans Before the Deal is Closed
So you’ve prequalified for a loan, found your dream home, and your offer has been accepted! Even if its tempting, don’t celebrate by financing another big purchase. Lenders pull credit reports before the closing to ensure that the borrower’s financial situation has not changed since the initial loan approval. Any new loans on your credit report are a red flag and can put your closing in jeopardy. So while now might seem like a great time to buy all new furniture for the house or a new car to park in the garage, save those bigger purchases for after closing.
Are you ready to take the plunge into the housing market?
I can guide you through every aspect of the home buying experience. If I can be of service as your buyer’s agent, please contact me.
