So you’ve decided to purchase your first home! CONGRATUATIONS! That’s an amazing decision and one that requires a great deal of planning and preparation. In this blog we’ll discuss some of the mistakes that first-time home buyers make and how to avoid them.
Imagine this: You're standing on the threshold of your very first home, keys in hand, heart racing with excitement. It's a milestone moment, isn't it? But before you get there, there's a maze of decisions to navigate, and one wrong turn could cost you dearly.
Welcome to the thrilling (and sometimes nerve-wracking) world of first-time home buying! While it's a journey filled with promise, it's also peppered with potential pitfalls that can trip up even the most prepared buyers.
We're pulling back the curtain on the "Top 7 Common Mistakes for First-Time Home Buyers." Think of it as your personal GPS through the home-buying landscape, helping you sidestep the hidden traps and stay on course to your dream home.
Ready to become a savvy home buyer? Let's dive in and turn those potential missteps into stepping stones to your new front door!
- Not Knowing how much house you can afford
Skipping the crucial step of determining your budget can lead to a frustrating home-buying experience. Without a clear financial picture, you risk wasting time on houses you can't afford or settling for properties that don't meet your needs.
For most first-time buyers, the goal is to find a home with a mortgage payment that fits comfortably into their monthly budget. If you're unsure about your financial limits, it's often wise to aim conservatively. This approach ensures your new home remains a source of joy, not financial stress.
1. Home Buying Power Calculator (link to a Nerdwallet calculator)
- Not Working With A Real Estate Agent (work with Me)
Many first-time buyers think going solo will save money, but this can be a costly mistake. Real estate agents offer invaluable expertise that often outweighs their fees:
- Market knowledge and access to more listings
- Skilled negotiation to get you the best deal
- Guidance through complex paperwork and processes
- Ability to spot potential issues you might miss
Ask for recommendations from recent homebuyers
Read online reviews
Interview multiple agents to find the best fit
Remember, a good agent's expertise can save you time, money, and stress in the long run. Their professional insights and connections are often crucial in finding your ideal home at the right price.
- Pre-Qualification vs. Pre-Approval: Know the Difference
Many first-time buyers confuse these two terms, potentially derailing their home search. Pre-Qualification:
- A rough estimate based on unverified information
- Quick but unreliable
- Holds little value in the buying process
Pre-Approval:
- Based on verified financial information
- Provides accurate borrowing limits and interest rates
- Carries weight with sellers
Pre-approval gives you a solid foundation for house hunting and shows sellers you're a serious buyer. Don't make the mistake of relying on a pre-qualification – it's essentially worthless in today's competitive market. Always opt for a pre-approval to strengthen your position and streamline your home-buying journey.
- Not checking credit reports and correcting errors
Mortgage lenders will scrutinize your credit reports when deciding whether to approve a loan and at what interest rate. If your credit report contains errors — like a loan wrongly taken out in your name — you might get quoted an interest rate that's higher than you deserve. That's why it pays to make sure your credit report is accurate.
How to avoid this mistake: You may request a free credit report each year from each of the three main credit bureaus. You may dispute any errors you find.
- Don’t Forget To Save For Closing Costs
Buying a home requires fees and taxes. Even when you do a 100% mortgage, such as a USDA loan or VA loan – there are costs beyond the property’s purchase price.
Here’s a sample of closing costs you might see at your settlement:
- Loan origination fees
- Title insurance and settlement fees
- Property taxes
- Escrow fees
- Transfer stamps
- Survey fees
There are even costs when you use a no-closing-cost mortgage because move-in day costs money. Moving companies, home repairs, and household appliances aren’t free.
Have a plan to have some cash.
- Don’t Skip The Home Inspection
A good inspection will save you tens of thousands of dollars in home repairs, system breakdowns, and insurance deductibles, so don’t skip it.
A home inspection examines a home, its systems, and appliances performed by a licensed professional. Home inspections cost $300-800 to commission, and eighty-six percent of homes require at least one minor or major repair.
Order a home inspection within seven days of going into contract. Select an experienced home inspector for the type of home you’re buying, one who understands your home’s systems, including heating, cooling, plumbing, and electrical.
During the home inspection, an inspector will share maintenance tips and home-keeping advice specific to your home. They may also share that your home requires a new roof or its foundation has creaks or leaks.
The inspector’s findings can be the basis for re-negotiating the contract for repairs, discounts, or cancellations. The money spent is worth it.
- Spending all your savings.
Spending the majority of your savings on the mortgage down payment can be a disastrous mistake. Many homebuyers reach deep into their savings so they can pay 20 percent or more for their down payment and avoid mortgage insurance. This practice can substantially reduce your monthly mortgage payment amount but it is unwise if it leaves you with no savings at all. Emergencies and unexpected expenses can pop up at any moment, and having a rainy-day fund to rely on offers invaluable peace of mind.
Conclusion
Embarking on your first home-buying journey is an exciting adventure, but it's also a complex process with potential pitfalls. By being aware of these common mistakes and taking steps to avoid them, you're setting yourself up for success.
Remember, knowledge is power in the world of real estate. Your dream home is out there, and with careful planning and informed decision-making, you'll be turning the key to your new front door before you know it. Happy house hunting!
