Just because you’re a first time home buyer, doesn’t mean you shouldn’t be able to navigate the process like a pro. In fact, with the right buyer’s agent and real estate know-how (not to mention, a little bit of common sense!), purchasing a home can be an easy, straight-forward experience. Just make sure to avoid these 13 all-too-easy-to-make mistakes when buying a home for the first time.
First Time Home Buyer Mistakes
1. Choosing the wrong Realtor (or not using one at all!)
From home financing jargon to complex contractual agreements, purchasing a home for the first time can be an extremely complicated process. Unfortunately, when a first time home buyer hires a real estate agent who lacks the necessary skills and experience, they are doing themselves a major disservice. The same goes for a first time home buyer who doesn’t hire a Realtor at all. It is very important that a first time home buyer enlist a trustworthy and seasoned buyer’s agent to carry them through the process from beginning to end. A top-notch Realtor should have a thorough understanding of the local market and should be able to handle all legalities.
2. Falling in love too quickly with a home
Don’t fall in love with a “dream house.” While some home buyers claim that “you just know, when you know,” the experienced ones will tell you that all homes come with problems and issues. New homes are listed every day – and you never know what will pop up on the market tomorrow. For these reasons, a first time home buyer should avoid falling head over heels in love with a home the first time they see it (especially if it’s out of their price range!). Instead, they should have an accurate (and full!) picture of the cons before purchasing a house.
3. Not paying attention to the home’s location
You know what they say: “location, location, location!”. When purchasing a home for the first time, buyers must pay attention to the location of the home. Why? Because a home’s location can be the most important factor in determining its resale value, as well as its future appreciation.
4. Foregoing an inspection
While it certainly makes an offer more appealing to a seller, foregoing an inspection isn’t the best option for a first time home buyer. Without an inspection or contingency clause, a buyer could end up in a money pit of a home. For this reason, buyers should make sure the home checks out before closing on the deal.
5. Buying a home they can’t actually afford
Just because a buyer can obtain a mortgage for an expensive home, doesn’t mean they can actually afford the home. In addition to mortgage payments, a first time home buyer must be able to budget for other fees and monthly payments. These may include closing costs, homeowner’s insurance, property taxes, utilities and HOA fees.
6. Not exploring the neighborhood or meeting the neighbors
There’s more to a home than its interior. A first time home buyer should step outside and explore the home’s neighborhood to make sure it’s a good fit for their lifestyle. Not doing so could be a big mistake. Purchasing a home without spending quality time in the neighborhood or meeting the neighbors, may end in a serious case of buyer’s remorse.
7. Making another large purchase before the deal is closed
Prior to closing, a first time home buyer should not celebrate the new house with another large purchase (think: an expensive sofa, car or anything that requires a loan). The reason? Banks/lenders will be pulling and assessing the home buyer’s credit reports before giving out a loan. Unfortunately, a disruption or change in the buyer’s financial situation (read: a pricey couch financed by a credit card) can negatively affect their approval for a loan.
8. Not establishing good credit beforehand
If a first time home buyer is planning to purchase a home with credit, they’ll need a solid credit score first. Why? Because without it, they’ll have a hard time securing a mortgage from a bank. In addition, having a higher credit score makes it more likely that they will obtain better interest rates (and possibly a lower down payment requirement as well).
9. Looking at homes before getting pre-approved for a mortgage
While looking at homes can certainly be fun, it may be a complete waste of the buyer’s time. Before purchasing a home, a first time home buyer should get pre-approved for a mortgage. Not only will a pre-approval letter help the buyer determine what they can reasonably afford, but it will also strengthen an offer in the eyes of the seller.
10. Focusing on cosmetic features instead of the bones
While it’s easy to get swept up in a home’s marble countertops, wood floors and staged furniture, it’s important to remember that the home’s bones are key. A first time home buyer should always take into account the condition of the roof, HVAC unit, natural light, construction quality, plumbing, electrical issues, age and location. These factors should be critical when it comes a home buying decision.
11. Not saving for a down payment
In general, the larger the down payment, the better your offer will appear to the seller. Ideally, first time home buyers should have at least 10 percent of the home’s cost in savings. 20 percent or more is considered even better.
12. Not looking at the comps
Your real estate agent should be able to assist you with finding a listing’s comparable sales. “Comps,” as they are often called, help with determining the true market value of a home. They are typically homes that have similar square footage and/or similar features, and they should be located within the same neighborhood or building. Before purchasing a home for the first time, buyers should look at nearby comps to figure out what the listing is really worth. If the asking price is too high, buyers will need to decide whether they are willing and able to pay more than the home’s market value. Comps also help determine a home’s appraised value. If the home doesn’t appraise (read: the home’s appraisal comes in much lower than the agreed upon price), the buyer may not be able to secure a high enough loan from a lender to afford the house. For this reason, first time buyers who are financing their home will need to pay special attention to the comps.
13. Not using reputable movers
Once a first time home buyer has purchased a home, they’ll need to start planning their move. Unfortunately, it’s all too easy to fall for a too-good-to-be-true moving company estimate. You should check moving company reviews as well as with the FMCSA website. Best of luck and happy moving!