Embarking on the journey that leads to the purchase of your first home is exciting and scary at the same time. You will enjoy the process more and find it less stressful when you work to avoid the top 10 mistakes that first time home buyers often make.
1. Working Without a Budget
A bank will give you a mortgage amount they are willing to finance on your behalf. Often that number is higher than what you can comfortably afford each month. To find out where your mortgage payments need to be, make a budget. List your monthly expenses out and deduct that from your monthly income. The remaining amount is the mortgage you can comfortably afford each month.
2. Disregard the Mortgage Qualification Process
The bank gives you a pre-approved loan qualification letter that shows the amount of financing you can expect to receive. When you neglect to obtain that pre-approval first, you may end up in a situation where you need more financing than the bank is willing to provide. You then have to back out of the sale and forfeit any money you may have paid up to that point.
3. Added Expenses Oversight
Owning a home is quite different than being in a rental property. As a renter, there is a property management team available to handle repairs and emergency situations. When you own a home, these situations fall on your shoulders. There is also the extra costs of property taxes, homeowners insurance and damage repairs when things go wrong. You may even have a monthly homeowners association payment as well. It is a good idea to start putting money into a savings account as a way to prepare for the extra unplanned expenses you will incur as a homeowner.
4. Wishlist Loyalty
You are going to delete several smaller wishlist items when purchasing your home. There is not a home on the market that will offer everything that you want. Focus on the main elements, such as property location and size, and learn to compromise on the smaller things. You can replace countertops easier than you can find a home in your ideal location.
5. Neglect the Bigger Picture
As a first time home buyer, your options will match what you can afford at the time. You may have to purchase a home in need of updated appliances and countertops or a fresh exterior paint job. Those things often overshadow other elements of the home and affect your purchase decision. Be willing to accept the minor issues when the major elements, such as property location and size, match what you are looking for in a home.
6. Loving Staging Features
Sellers stage a home so that it makes an impactful first impression on buyers. Focusing on these features instead of the foundational elements of a home can result in you spending more money than you plan. For example, marble countertops are impressive yet high in maintenance. You should focus on a home where you can add value to it and see an increase in your home equity as well.
7. Sacrificing What’s Important
There are some features of a home that you should not compromise on, even if it means purchasing a cheaper home. You may be looking at a house instead of a condo because you had a miserable neighbor experience and wanted to avoid that again. Avoid settling for a two bedroom home when you prefer a three bedroom that gives you room for guests to visit and home office space.
8. Failure to Inspect
A home inspection is your opportunity to find out structural details about the home. You will learn if there is faulty electrical wiring, a crack in the foundation or a roof that needs repair. Knowing these things before closing gives you the chance to require a seller to resolve the issues. Failure to have the inspection done makes those issues your problem after purchase.
9. Going it Alone
Each home that you look at will have a real estate agent that works for the seller. That person acts in the seller’s best interest and may not provide an accurate picture of the property. It makes you vulnerable, and the only thing you can do to protect yourself is having a real estate agent of your own. That person will act in your best interest and protect your financial investment as well.
10. Avoid Long Term Planning
Before buying a home, do your research to learn as much as possible about the location. See if there are plans to build a highway nearby or expand a major road. Look at property value histories for the area and if future developments are coming. Learn what the area will be like in the coming year to know if you still want to call it home.
As a first time buyer, the process can be scary and stressful. These tips should help you make a plan and find the home of your dreams without the typical hassle playing a part.