First Time Home Buyer Mistakes You Should DEFINITELY Avoid
If you've decided you're ready to buy your first home, you've probably gotten tons of unsolicited advice regarding what you should and shouldn't do. Take it from the real estate professionals - there are a lot of things you should and shouldn't do before buying your first home, but let's take a look at the top 5.
1. Not knowing how much you can afford
Have you pre-applied for a mortgage? Have you had a professional check your credit? Have you applied for a loan to see what price range of a home you should be looking into? You may feel you're ready for a mortgage payment every month, but would you be able to afford it? It's our advice that you get pre-approved and THEN start looking for a home. I'm sure you've seen an episode of Property Brothers where a couple leads off the show talking about all of the amenities and finishes they hope to see in their home, and then gives a budget that seems way too low for what they want... and then the hosts of the show will show them their dream home, tell them the price (often $200,000+ more than their budget), and the couple is suddenly well aware of what their budge can afford in the allotted area.
Don't start looking at million dollar homes, get attached to the nice finishes and high-end counters, and then learn you can only afford a $500,000 home. Know before you go.
There are many different types of home loan programs and first-time home buyer credits that you can participate in. Remember, conventional loans will typically ask for 10-20% down and if you're not putting down the full 20%, you will need to purchase separate mortgage insurance. (FHA Loans require 3.5% down and a 580 or higher credit). Always check with your financial adviser and Realtor about which loan is right for you and your situation.
2. ..and failing to consider additional expenses
Have you put enough away to afford closing costs? Have you considered how much you'll need in order to live in the house you're buying? Once you take ownership, you'll be responsible for the renovations and repairs that come up. If your laundry machine breaks, will you be able to afford repairing it or buying a new one? The cost that comes with owning a home is high. You'll be in charge of mowing the lawn or removing snow from your driveway. Be prepared and be sure you don't use all of your savings in order to buy the home, leaving yourself stranded when problems arise (and they will).
There are also pesky property taxes and home owner's insurance that tend to increase yearly. If you're stretching your budget already, you may not be able to afford your home several years down the road unless your income changes.
- Avoid these 8 common home buyer mistakes
- Home buying: how to determine your search criteria
- 10 questions to ask when interviewing a Realtor®
3. Not contacting the right agent
If you're new to buying and/or selling, you might not know much about what a Realtor® does. There are differences, too, between listing agents and buying agents. If you want to know more about Realtors® - check out this blog post! Everyone seems to know a licensed agent these days, but going with your friend's cousin who just passed the test might not be the best deal for you. You may want to help them out, we understand, but this is a large purchase. Do you want to trust someone new to the business with your livelihood? Not to mention, what if they can't find you your dream house for the right price, could that affect your relationship with your friend? Find out 10 questions to ask a Realtor® before you hire one in our Market Ready Guide.
4. Being indecisive
Much like rule #1, where you should be getting pre-approved for loans and mortgages before you begin your home search, you should have a decent idea of the non-negotiables in your future home. For example, if you plan on having kids in the future, don't entertain the idea of a two bedroom home that wouldn't allow you space to grow with your future family. If you're a self-proclaimed master chef and you love to cook for family and friends, don't look at homes with tiny kitchens (alternatively, don't look for homes that don't give you room for home improvements - maybe you can remove a wall to create more space and keep your guests all together; also don't forget to include this extra cost in your budget).
5. Making large purchases before Closing
Your credit is what lenders base your loan on. Hold off on buying the new fridge for your home until after closing, otherwise, this could hurt your buying power. Lenders want to make sure your financial situation hasn't changed since you were pre-approved, thus any new loans on your credit could affect you in closing.
There you have it! There are 5 things you should definitely not do when you're purchasing a new home. Whether it's your first home or your fifth, make sure you have a team of people surrounding you that are here for you.
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