Buying a home for the first time is an exciting, stressful process. While it’s fun to dream about your first home (and you should), it’s also important to keep a level head. Unless you have some previous experience with real estate, mortgages, and property ownership, you should be very careful. Just as there are a lot of moments to look forward to as you enter this process, there are also many first time home buyer mistakes to avoid. When you’re spending such a large portion of your savings and committing to a mortgage, you need to be extra cautious and make your first home buying experience a great one.
First Time Home Buyer Mistakes
- Overlooking Extra Costs
Sometimes first-time home buyers feel that they’re ready to buy a house simply because they can afford mortgage payments. They forget all the extra costs that come along with owning property. It’s one of the easiest first time home buying mistakes to make. Property insurance, taxes, homeowners association dues, maintenance, and electric and water bills may all take a nip at your wallet. Plus, some of these fees (like property taxes and insurance) tend to increase each year. Can you afford not only your mortgage payments but also extra fees (some of which may rise each year)? Don’t buy a home just because it feels right; wait until you’re comfortable financially.
- Choosing Not to Get Pre-Approved for a Loan
When you decide you want to purchase a home for the first time, your search should begin with a mortgage lender. Unless you have enough money in cash to purchase a home (and if so, congratulations!), you will need a mortgage and it’s important to know how much you qualify for beforehand. Don’t be afraid to meet with a lender, fearing you won’t qualify or will be given a much smaller loan than expected. That may happen, but it’s better that you know your financial situation before you start seriously looking at houses. You don’t want to fall in love with a house you can’t afford.
- Working Alone
Unless you have a loved one in the real estate business willing to help you out, you need to find a trustworthy real estate agent and mortgage lender. One of the most common first time home buyer mistakes is attempting to deal directly with a listing agent. That agent is not on your side and won’t be a reliable person to turn to for help. Hire someone you can trust (if possible, use a recommendation from a friend or family member). This is a huge, extremely important investment and you don’t want an amateur (i.e., you) taking it on alone.
- Furnishing Your New House Before the Closing Day
It’s extremely tempting to start making big purchases after you’ve signed off on your new house. You feel triumphant—you’ve avoided all of our other first time home buyer mistakes, you have your contract and your loan, and the closing day is just a few weeks away. Don’t use that good energy as fuel to make more extravagant purchases, such as furniture sets, kitchen appliances, or even a car. Mortgage lenders often pull credit reports before the closing of a house to check that the borrower’s financial situation hasn’t changed since the loan was approved. If there are new loans (like car loans) on the report, your mortgage could be in danger.
- 5. Emptying Out Your Savings
Just because you can afford a mortgage and a down payment, that doesn’t mean you should buy a home straightaway. If you have to scrape the bottom of your savings barrel to make it work, you should not be buying a house yet. It’s tempting to make a 20% (or more) down payment because then you won’t have to pay mortgage insurance, which reduces your monthly mortgage payment. Tempting, but not worth it. Instead of spending all of your savings and living in fear of a rainy day, make a smaller down payment and pay for mortgage insurance. Or if you’d rather, wait until it’s more financially feasible for you to spend that money.
Avoiding first time home buyer mistakes is all about ignoring temptation and using your head. Make logical decisions, not emotional ones, and don’t overestimate the size of your bank account. If you’re cautious of our first time home buyer mistakes and want to get started on #2 right away, give Prime Lending a call. Our lenders would love to hear from you!