If you’re a first time home buyer, you’re unfamiliar with the process, so you could fall into costly or time consuming mistakes. Here is a list of the most common errors new buyers make and how to avoid them. Once you know the ins and out of the process, you can have a seamless and stress-free buying experience.
- Not checking your credit score. Even before you start the search process, you should know your credit score and take time to check for any errors and have them fixed by credit agencies. Your credit score is one of the first things that lenders look at and you want your numbers to reflect your true financial picture and provide you with the best chance for a good interest rate.
- Failing to get pre-approved. A pre-approval for a mortgage will help you narrow down your search to the houses you can afford. You don’t want to waste time looking at homes you can’t buy and getting your hopes up looking at more expensive properties. Be realistic and stick within your budget to avoid heartache later.
- Skipping the inspection. Even if the home is brand new, you never want to skip the inspection even if you have the appraisal. They are two different things. An inspector will look at the home’s condition and appraiser looks at the value of the home. An inspector will find any issues that may need repairing before closing and that can affect the purchase price. You also don’t want to find issues later that you have to financially cover because you failed to get a proper inspection.
- Failing to budget. Before you decide to buy a home, it’s important to create a budget, not only for buying a house, but for planning to pay for it in the future. One rule is to not spend more than 1/3 of your budget on housing including monthly mortgage payment, taxes and insurance. This will allow you to have money left over to pay for other expenses such as utilities, food, gas, and other monthly home expenses.
- Spending too much before closing. Lenders will look at your credit again before closing, so put off any major purchases on credit such as a car, or furniture until you have closed on the home. Also, try not to switch jobs since that counts as a major financial change and is considered risky as you don’t have as much stability in a new position.
- Not researching the right agent. Especially with the first home, you want a real estate agent to spend time with you to walk you through the process and help answer all your questions. You want someone who has your interests in mind and has experience with new home buyers. A good realtor will steer you in the right direction and not have their commission as their top priority.
- Thinking you’ll find your dream home. It is rare that a first-time home buyer gets all that they wish for in their first home. Narrow down your wish list and organize by priority and include must haves, nice to have and deal breakers. If you keep looking for everything you want, you’ll be searching a long time and miss an opportunity to find the right home for your needs.
- Not researching the location. Even if you don’t have kids right now, you should look into the school system, community and neighborhood. You want a safe environment and one where you can live for a long time. Don’t fall in love with the house before you decide if the location is the right one.
- Not considering resale. Even though you’re just buying your first home, you should look to the future and how sellable that home will be. You never know where life will take you (new job, caring for family, new baby). You want to buy a home that another buyer will want.
- Not having enough money left over. After the closing, you don’t want your bank account to be empty. You should have a few months of expenses saved for an emergency (like a broken hot water heater or a leaky roof) and have money to buy any household items you need to start your new life. You don’t want to be house poor and not be able to afford to live your life. Having money after closing goes back to mistake #4. If you budget correctly, you should be able to have enough savings after you move in.
Don’t make these first-time buyer mistakes. Plan, research, save and enjoy your new home!