As a first-time homebuyer (or even if it’s been years since you’ve bought a house!), there are a lot of common home buyer mistakes you’ll want to avoid. Starting with your mortgage pre-approval and ending with you actually moving into your dream house, at the end of the process, you’ll be a home-buying expert.
However, with all the moving pieces involved, there’s a lot of room for error. We suggest looking for homebuyer classes as a way to start your journey to homeownership and consulting with a qualified team of real estate professionals. If you want a quick guide, read on for our guide of first-time homebuyer mistakes so you can identify potential hurdles and hopefully avoid most of them!
How to Avoid These First Time Home Buyer Mistakes
Every year, first-time homebuyers make their way into the real estate market, and without the right help or knowledge, they make the same mistakes their parents or family members did. Today’s buyers can stop the cycle. Here’s our list of errors to watch out for and what to do instead!
Waiting To Start Saving
One big mistake that new owners make is waiting too long to save. Before you even start looking for homes, saving early can help you contribute more money overall. Plus, you have the potential to earn more with interest from a savings account. When buying a house, you’ll need cash up-front to cover both your down payment and closing costs.
Try to create a separate account dedicated to your home-buying savings so that you know exactly how much you have to contribute to your future house when it’s time to buy. Automatic deposits can help you stay on track and grow your savings quickly.
Saving For a Down Payment Only
Since we’re talking about saving, let’s discuss some of the others costs you should consider as you’re looking forward to your new home.
As the buyer, you’ll be responsible for several closing costs. They can include:
- Loan origination fees — 1% of the home’s purchase price
- Down payment — at least 3% of the home’s purchase price
- Escrow fees — 2% of the home’s purchase price
- Title insurance — varies by location
- Homeowner’s insurance — 1 year of premiums
- Private mortgage insurance — up-front premium or monthly payments
- Property tax — 6 months
- Escrow fees — 2% of the home’s purchase price
It’s also a good idea to save money for your move-in plan. That could include shelling out money for professional movers, a moving truck, and more. In addition, new houses often require new appliances and other upgrades around the property to make it feel like a home. Though you’ll likely get a better idea of how much you need after you choose the house you want, it’s good to anticipate these extra expenses from the beginning.
Overestimating How Much House You Can Afford
It is a waste of time and energy to start looking for houses when you don’t know how much home you can afford. You don’t want to end up looking at houses that are out of reach and get your hopes up only to have them crash down again.
First-time homebuyers should look for homes where the loan amount leaves with a comfortable monthly payment that won’t cause extra stress on their lives.
You can avoid homebuyers’ mistakes like these when you get a mortgage preapproval letter, which will tell you exactly how much you can afford.
Going With The First Mortgage Lender
Since we mentioned mortgage preapprovals, we thought it might also be good to mention that it’s essential to compare offers. Mortgage interest rates and closing costs vary from lender to lender. This is a huge one on the list of homebuyer mistakes — almost half of the borrowers looking to buy a home don’t shop for a loan.
Avoid this mistake by applying with multiple lenders. All mortgage applications made within a 45-day window will count as just one credit inquiry, so your credit won’t plummet if you get all your applications done within a short time frame.
Not Taking Advantage Of First-Time Home Buyer Programs
First-time homebuyers don’t often have a ton of money saved up for the down payment or closing costs. However, don’t feel like you can’t afford a home without a considerable sum saved up! There are plenty of low-down-payment loan programs that you can participate in. In addition, you might qualify for down payment assistance and competitive mortgage rates for first-time homebuyers.
Ask your real estate agent or mortgage lender about first-time homebuyer options and look for programs in your state. For example, the Federal Housing Administration loans have a minimum down payment of 3.5%, and some other conventional loan programs allow down payments as low as 3%.
Not Checking Out The Neighborhood Before You Buy
You’re not just buying a new home; you’re moving into a new community. So check out the neighborhood before you buy to ensure it’s the right fit for you and your family’s lifestyle.
It’s good to check out the entertainment options that are available locally, as well as the distance to nearby schools, restaurants, grocery stores, and more. Travel costs can add up, so don’t forget to calculate the commute.
Skipping The Home Inspection
One of the biggest homebuyer mistakes you can make is skipping the home inspection. Home inspectors will help you evaluate a house and identify major structural issues your potential home might have, including repairs needed and the condition of included appliances. The goal is to make sure the home is liveable and that both the buyers and the sellers have a clear view of the house’s condition before any sale is finalized.
Though skipping an inspection can save you a little money upfront and even give you an edge in this competitive market, it could cost you thousands of dollars later. In addition, if you find significant damage after you close, you might end up having to pay more than the home is worth.
Talk to your real estate agent or ask your friends and family for home inspector recommendations. The inspector’s report can give you leverage when it comes to negotiating repairs or the price of the house.
Underestimating The Costs Of Homeownership
Remember that the monthly costs don’t go away when you buy a house. As a result, you might have different bills equal to more than what you were paying when you were renting. This could come as a surprise if you haven’t prepared.
You’ll have a mortgage payment, but also gas bills, cable bills, electric bills, water bills, and more! In addition, your new home might come with higher costs or entirely new bills you hadn’t considered.
Avoid surprises by working with a real estate agent who can tell you about the neighborhood’s property taxes and insurance costs. You can request to see the seller’s utility bills for the last twelve months, too, so that you can get a better idea of how much those things will cost after you move in.
Buying your first home (or at least first home in a while) should be an exciting life step! It can be a journey that offers comfort, financial benefits, plus security, and stability. Your home is where you’ll welcome family for the holidays, celebrate big wins with your friends and loved ones, and watch your family grow all under one roof. Let 41 Realty Group help you enjoy the home-buying process without getting completely overwhelmed. Get in touch with our team today and let us help you shop for the home you want and avoid some common homebuyer mistakes.