Being a first-time home-buyer can be frightening simply because it is something you have not done before. It is an emotional process, which anyone making such a large purchase needs upfront information and knowledge. There are common mistakes that first-time home-buyers often make that perhaps you can avoid if you are reading this. Let this be part of your Home-buyer Guide.
1. Expecting Too Much for the Money – You cannot expect, unless you are wealthy, to purchase your dream home the first time you buy a house. It is likely you are just beginning so you will purchase a starter home that is good enough and within your budget. This allows you to build equity so that later you can purchase a larger home when you really need it. Stay within budget.
2. Not Understanding Their Market – Each community has a different market climate. Some areas have houses, which are languishing and staying on the market for months and even years. In others, they are being snapped up within hours of going on the market. Understand what it is like where you want to buy.
3. Not Seeking Advice from a Lender – A lender is separate from your real estate agent. You should go to them first before you even start the buying process. Let them check your credit and get you a preapproval letter, which you give to the real estate agent as an assurance to them that you can actually buy a house. If there is a problem with your credit, the lender will tell you what to do to fix it. If your credit is fine, they will tell you what to do to keep it that way.
4. Not Using the Services of an Experienced Buyer’s Agent – A buyer’s agent is someone who works on your behalf to get you the best deal. If you look at houses that a particular realtor has listed, it is likely that they will try to get you to buy at the highest possible price to increase their commission.
5. Not Understanding What You Can Really Afford – What the bank says you can afford and what you can really afford may be two different things. Aside from the cost of the mortgage, other factors come into play such as the cost of private mortgage insurance (PMI), taxes, and insurance. The lender can provide a list of expenses that will be included in your monthly payments.
Additionally, you must remember that you still have utilities, groceries to buy, and other necessities that are not included in the debt to income ratios (DTI). If you have childcare, and other maintenance payments, you must consider this in your own ability to pay.
This is where some individuals get into a little trouble once their loan is closed. They forget to think about the necessities.
6. Not Working on Credit before Entering the Process – Before you even think about going to a lender to get pre-approved, find out how your credit looks. Do not purchase things on credit, pay down debt (if needed), and show that you can handle revolving credit. Do not be late on any payments, even your cell phone bill. Sock every penny you can into your savings account.
The more you pay down on a home loan, the more equity, and a better loan product you will have. It will be easier to qualify, and the shock of a higher mortgage payment will be less.
7. Thinking Bank Owned Properties Are Affordable – While it looks cool on HGTV to watch the flippers buy a bank-owned property and flip it, it is not that easy. Once you are locked into a bank-owned transaction, it could take months and even a year.
8. Getting too Excited in Front of the Seller’s Agent – When you go to open houses, do not act too excited if you do find your dream house. Take pictures if you are allowed, stay calm and be non-committal, then call your buyer’s agent to help you with the deal.
9. Skipping Inspections – While inspections are an added expense, and money you cannot get back even if the transaction goes south, they are very important. Usually, the inspection process starts after you have made an offer house and what you are having inspected.
If anyone else has had an inspection recently and the seller has a copy of it and is willing to let you see it, you can choose to use that one, but do not skip without knowing what you are getting into. A couple hundred down the tube is a lot better than $200,000 down the tube.
10. Not Researching Neighborhoods – All houses are not equal, listings on some sources listed here will vary. The square footage may be the same; however, the amenities, condition, and structure are different. Once you have your pre-approval you can do some of your own search using sites like Trulia.com, Zillow.com, and real estate company’s websites to look at houses in the areas you want to live. This will help you understand the market more, and Zillow.com even tells you what they think the house is worth compared to what other houses are selling for in the area.
Note:
Zillow/Trulia: When beginning to look for a property you do not always get the exact/precise information, appraised values, or sales prices and they are only estimates or previous appraised values. Very often in some locations, the values are too high. This does depend upon where you live. Metropolitan areas will be easier than smaller areas. Some regions have fewer of the same comparable sales to work with. These sources have not inspected the property, or looked at the condition, as an appraiser will when he/she walks through the home. Rural property is much harder to value as comparable sales are not as plentiful.
You want to be sure that you are not offering more than the house is worth, and that the house is in quality shape.
Understanding the factors that go into play to purchase a house will help you avoid mistakes that many first-time home-buyers make.
First and foremost: always ask questions, never be thrown off until you get the answers and understanding of your questions. It does not matter how little it seems, you can never know too much.
