Preparing to buy your first home is an exciting time!. But, it can also be overwhelming. Working with a real estate professional can help reduce your stress, however, it's important to have some knowledge of what you're getting into before you embark on the journey. Here is a list of 10 common mistakes made by first timers:
Mistake 10: Not Budgeting for Your First Home Loan
Home ownership may seem like a wise alternative to renting, but it's not necessarily going to be cheaper in the short term. If you're like most people and need to take out a loan to buy a house, you'll have to make monthly mortgage payments. Before you make this decision, take a good, hard look at your income and expenses to find out the truth about what you can comfortably afford to pay every month for the next 15 or 30 years.
The easiest way to do this is to make a budget. This entails listing all your income, including wage and investments as well as all of your expenses, from monthly payments to food and even haircuts. To figure out how much you can afford per month on something like a mortgage. Also look at a few months of your financial activity to consider non-monthly expenses like vacations, wedding and birthday gifts.
Mistake 9: Not Performing a Credit Check Before Homebuying
Your credit score is a number that is meant to represent how credit-worthy you are. This information is of particular interest to the companies who are considering granting you a loan. Despite your present sense of financial responsibility, if you have a dark past of not always paying bills on time, it could mean you're going to have a very hard time securing a good loan during your house hunt.
If your credit report is less than stellar, they may reject you or tack a steep interest rate onto your loan.
Mistake 8: Not Understanding Housing Market Trends
The housing market isn't static -- it fluctuates. Sometimes it favors those looking to buy -- a buyers' market. Other times it favors those looking to sell -- a sellers' market.
Even with a clear idea of your own financial status -- what you can afford and how trustworthy you will appear to a lending institution – you must still pay attention to the big picture. If you're anxious to buy now just because of your own financial situation or restrict yourself to a particular location, you may not see the forest for the trees.
Mistake 7: Not Getting a Preapproved Home Loan
It's easy to fall into the trap of thinking you first find the house you want, and then you can start thinking about the loan process, especially if you've already taken care of your credit. However, it's not quite that simple.
It's a good idea to put yourself in a seller's shoes. As the seller, you've already put a lot of time and effort into selling your home, and you'd like to finish things up without too much hassle and delay. This is why ellers prefer bids from prospective buyers who already are pre-qualified or pre-approved for a loan. Some sellers may refuse to consider you at all unless you've got a pre-approval letter from your lender.
Mistake 6: Not Considering Home Resale Value
Life is full of unexpected changes. Job transfers, family illnesses, hard financial times, falling in love with someone who lives on the other side of the country -- any of these might call you to pick up and leave your beloved house behind at any time. If or when the time comes, will your house be easy to sell? And will selling it give you a nice sum to put down on another home?
You're making an investment, so it would be a mistake to ignore these questions. When you are looking at particular houses, it may be a good idea to consider the preferences of other typical homebuyers -- not just your own. Maybe this means choosing a home that has several bathrooms and a nice big yard even if you have no personal preference about these features
Mistake 5: Blindly Following Your Realtor's Advice
As we've seen, first-time homebuyers have a lot of confusing matters to deal with. From fixing credit to trying to figure out complex housing market trends, they have a lot on their plate during what is already a stressful financial decision. This is why real estate agents, who try to facilitate the process, appear as godsends to some buyers.
Remember, there are bad seeds in every industry. It is important to make sure you choose someone that will put your best interest first and will remain honest with you throughout the process. Consider your options before you choose a realtor to work with.
Mistake 4: Trusting a Verbal Agreement
A handshake won't hold up in court if a seller decides to go back on his word, but a signed agreement will. Double-crosses happen in deals all the time. So, it's always good to secure agreements in writing before you start celebrating and packing up the moving truck. Verbal agreements are not binding, and you will find that you have little legal recourse.
Mistake 3: Forgetting About the Hidden Costs
While there are other fees you may pay in your home purchase, here's a list of common fees you should expect to pay:
- Closing costs
- Appraisal Fee
- Credit Report Fee
- Notary Fee
- Homeowner's Insurance Fees
- Property taxes
Be sure you’re aware of all the fees involved in buying a home before you embark on the process.
Mistake 2: Skipping the Home Inspection
If you skip the step of getting your own professional inspection, you risk living in a home that costs almost as much in repairs as you paid for it in the first place. As much as you're attracted to unique fixtures and structures in old houses, they may turn into a major liability.
So, when you make your offer to the seller, make sure they know that your offer is contingent on your approval of the house passing inspections.
Mistake 1: Falling In Love with a House
Falling in love with a house will very likely blind you to its financial value. You might find yourself offering a bid that far exceeds the true worth of the house, which makes for a bad investment. And, if you expose your infatuation to the seller or the seller's agent, they'll realize you'll be willing to overpay.
Not only can it lead to overpaying, but it can also allow you to fall into the several of the other mistakes that we've discussed in this list.