First Time Home Buyer? Don't Make These Mistakes
You’ve saved the down payment, your credit is excellent, and you’re finally ready to buy your first house. Now all you need to do is find one, right?
It’s not that easy.
Nobody’s perfect the first time they do something. And buying a home is no different. Be sure you don't make these first-time home buyer mistakes.
Buying during a seller's market
What's a seller's market, you might be asking? It's basically when there are fewer houses to go around, so sellers can name their price and buyers have less clout when it comes to haggling or renegotiating that sum.
Put feelers out about the local real estate market and keep lines of conversation open with seasoned real estate experts to determine whether or not you're currently embroiled in a seller's market. If you are, wait it out, if possible. Your pocketbook will thank you later on.
Just looking at the sticker price
There’s a lot more to buying a home than just the mortgage. Make sure you budget for your closing costs, taxes, homeowners association fees, and homeowners insurance. You can ask your real estate agent for an estimate on what those will cost for your house. Get out your reading glasses, even if you don't think you need them, and read that fine print.
Making too much of a financial commitment
You might be surprised when you see how much you were pre-approved for--especially if you have good credit and a low debt to income ratio. But mortgage lenders aren’t your accountant, and they don't know your long-term plan.
Your preapproval doesn't take into account how much you want to save for retirement, the money you need to put away for an emergency fund, or what you want kind of lifestyle you want to live.
So, when you're choosing your first home, be sure to take a close look at your entire budget and figure out what type of mortgage payment you can comfortably afford each month. Once you figure that out, you can use our mortgage payment calculator to see how much you should spend on a house.
Sticking with the first lender you got a quote from
Speaking of pre-approvals, you don't have to take the first offer you see from a mortgage lender. Be sure to shop around for your mortgage so you can be sure you're getting the best rate. That rate is going to affect your payment for years to come and even a 1 percent difference can mean a lot more money out of your pocket over time.
Not researching the neighborhood
Choosing the wrong neighborhood isn’t such a big deal when you’re renting. After your lease is up, you can always move. But you can’t change your location that easily when you’re a homeowner. Not to mention, if the neighborhood continues to go downhill, your home value is going to suffer when it’s time to sell. So ask your real estate agent, do your research, and find the right neighborhood.
Being a hardliner
There are some parts of your house that you absolutely should not compromise on. But if you really hate the wall color and those bushes by the window are awful, are those really deal breakers? Cosmetics are fixable over time. Check your budget, and make sure you can either afford to fix those things before you move in or that you're willing to live with them for a while.
Over (or under) estimating ability to DIY changes
It’s not going to take a lot of money or time to paint over that red wall you hate. But it’s a different story if you want an open floor plan and need to knock down a couple of walls to do it. And if it’s a really big project, you might even need to hire a professional. So, don’t count on DIYing yourself to a perfect home.
There’s nothing wrong with being trusting and optimistic. But no matter how nice the sellers are, you need to get your new home inspected. There might be issues that the current homeowners didn’t even know about. Checking now will help make sure you don’t find out your new home has termite damage or structural issues. Every now and then, there will be an exception to this rule, like there was for this couple, but be very cautious.
Only thinking short-term
If you’re planning on raising a family in your new house, you should pay attention to things like schools and nearby parks. And if you’re only planning on staying there a year or two, does it make more sense to keep renting until you can stay somewhere more permanently?
These are questions you've got to answer for yourself. Need more guidance from a real estate insider on the home buying process? Check out this article from New York real estate veteran Kyle Hiscock for his perspective.
Most of the mistakes we see first-time homebuyers make have to do with lack of education or planning. Check out our tips for first-time home buyers and calculators to get started making your plan for success.