If you’re a first-time home buyer, buying a house can be certainly overwhelming, but with an agent by your side to guide you, you’ll make it through just fine. In order to prepare you for this process, you might want to be aware of these beginner mistakes, especially if you’re searching for a home in an area where the market is very competitive, making one of these mistakes could end up costing you in the long run. Let’s take a look at a few things that can be easily avoided to keep you going in the right direction:
1. FIRST THINGS FIRST
Home buying doesn’t begin with home searching. It begins with a mortgage prequalification — unless of course you’re lucky to have enough money to pay cash for your first house. Some first-time home buyers may feel nervous or afraid to get prequalified; to take that first step. They fear the lender may tell them they don’t qualify for a mortgage or they qualify for a loan smaller than expected. Sure, it’s more fun to go look at houses than to sit in a lender’s office where you have to expose your financial situation. You get preapproved, and then you find a home and this way, you’ll make a financial decision versus an emotional decision. Be confident in your decision to want to begin the process and start off on the right foot – know where you stand (financially) before you start shopping.
2. SWEET EMOTION
Buying a home can be a long and frustrating process. In today’s market, starter homes go quickly, and it’s quite common for first-time buyers to experience rejection on the first offers they make. In that kind of environment, it’s very easy to fall in love with a house that’s out of your budget, or get caught up in the heat of a bidding war and end up paying more than you expected. There are many factors involved in a successful real estate contract, so make sure you talk to your agent about your local market so that you have realistic expectations from the get go. It is important to have an agent that knows exactly what you’re looking for and how much you can afford to spend.
3. MONEY, MONEY, MONEY
If you saved up enough money for a down payment, congratulations that’s a huge accomplishment! Unfortunately, contrary to popular belief, that’s not all you need. It is recommended that buyers should have two to three months worth of mortgage payments on reserve, on top of the amount of closing costs (which could be between 2% – 5% of the home’s price) and property taxes. To keep in mind also, once you move in, you’ll need to buy household essentials you may have never owned before such as appliances, tools, and garden supplies.
4. ‘TIL DEBT DO US PART
Your debt-to-income ratio is one of the first things lenders look at when it comes to assessing how well you’ll be able to afford mortgage payments. Whether you have past student loans, new car loans, etc., try your best to minimize those as much as you can before you can apply for a mortgage. In saying that, some lenders can actually pull credit reports right before the closing to make sure the borrower’s financial situation has not changed since the loan was approved. Any new loans on your credit report may jeopardize the closing. Avoid buying new furniture for the house or a new car until after you’ve moved in!
5. EVERY ROSE HAS ITS THORN
All homes need inspections, even brand-new ones. On occasion, some home buyers skip this step because they get emotionally attached to the home and want it no matter what. Once inspected, if the home does have issues, you’ll want the seller to fix them or to lower the price. If you’re a first-time home buyer, you might be a bit shy about asking the seller to fix that stuck window or leaky faucet but the reality is that the buyers who ask for more, tend to get more. Don’t be afraid to speak up and get outstanding issues fixed before you sign those settlement papers. This is also what having a great realtor is for – to handle the tougher conversations to get you what you deserve!
Buying a house is a stressful and nerve-racking time, regardless of whether you’re a first-timer or a veteran buyer. Unexpected problems can and will pop up – these can include hidden damage found during a home inspection, a low appraisal, and higher than expected closing costs. It’s an unpredictable process, but the more you know about the process, the easier it is to avoid serious mistakes. Having a great agent who has your best interests at heart, will work wonders for you as well!