Top 5 Most Common Mistakes First-time Homebuyers Make
Buying your first home is a big deal and with such a major decision can come big mistakes, if you aren’t careful. Here are the top 5 most common buyer mistakes and tips on how to avoid them.
- Shopping for a home before applying for a mortgage
- Finding out how much you can reasonably afford in a home is always your first step when beginning the home buying process. It’s crucial that you, as a homebuyer, know exactly how much you are approved for and have an approval letter in hand before you step foot in any prospective home. Why? For one, knowing how much you have to spend prevents you from falling in love with a home that’s above your budget AND from settling for one when you can afford more. Additionally, to go to contract on any home, you will need a pre-approval letter from a lender to submit your offer. In a competitive market where inventory is limited, your home could be sold fast to the next buyer while you’re waiting for a pre-approval.
- Only talking to one lender
- There are several loan programs out there and choosing the best one really depends on your financial situation. Therefore, it’s important that you shop around and gather as much information as possible about the loan programs you qualify for. It’s advised that you shop at least three lenders before making a decision. Each lender should be able to review your file and give you details on the loan program(s) you qualify for. Be sure to compare rates, fees and loan terms. Then you can accurately and more confidently decide which program and lender work best for you. Also, pay close attention to each lender’s level of customer service. The interaction you have with your loan officer/lender can make or break your entire home buying experience. Since the financing portion of the process is considered the most intense, having someone you can trust, who is responsive and knowledgeable is key!
- Buying more house than you can afford
- In a competitive seller’s market with limited inventory, home prices are typically higher – some would say inflated. Thus, when you find the home you love, it’s not hard to overextend yourself by stretching your budget just so you can get that dream kitchen with the flawless center island. It's important to note that buying a home that is overbudget places you at a higher risk for losing it should you ever fall on difficult financial times. Additionally, by having so much of your income tied up into the mortgage, you impact your ability to pay your other bills. This is what we refer to as being “house poor.” Fortunately, the criteria for home mortgage lending have tightened since the last housing crisis however, it’s still possible to be approved for more than you are ‘willing’ to spend monthly on your home. How? Lenders don’t take into account your bills not attached to your credit (i.e gas, food, etc) when reviewing your file for loan approval. Therefore, it’s important that you create a mortgage budget based on your actual monthly spending and stick to it!
- Making decisions based on emotions
- It can be an emotional experience after searching for a while and then finally finding that ‘perfect’ house to call home. Think about it! You envision yourself in this home and your family making tons of happy memories. You’ve become attached to the home and it’s not even yours yet. It’s recommended that you not become attached or emotionally invested into any home that you view because it can lead to you overpaying for it. Also, being attached to a home when your offer isn’t accepted can cause you to become biased and closed-minded to the homes you view after. This subsequently could affect you ever purchasing a home because when compared to your dream home, the other simply fall short.
- Waiting for the ‘perfect time’ to buy
- Maybe you're waiting for the rates and home prices to be at the lowest before you buy a home? Or perhaps you’re waiting until you have 20% saved to put down? There will never be the perfect time to buy a home as no one has a magic crystal ball that determines when the perfect scenario presents itself. Sometimes you have to just go for it and waiting for the perfect time could actually cause you to miss out. As long as you do your research, consider all your options and budget appropriately, you shouldn’t have a problem finding a great deal.