Buying a home can be both exhilarating and terrifying. It’s the largest investment you will ever make and often viewed as the ultimate achievement in one’s personal and financial life. For first time home buyers, it often means no more landlords, white walls and noisy upstairs neighbors. Home owning can sound like paradise for long time renters ready to dive into homeownership. However, before you can start planning your housewarming party, there are some important steps to be aware of. Here are 5 common mistakes first time homebuyers make and how to avoid them.
1. Not knowing what you can afford.
Being able to afford a mortgage payment doesn’t necessarily mean you can afford to own a home. Remember to calculate regular maintenance expenses, property insurance, and higher utility bills due to more space. Know your monthly budget and consider ways it may change over the next 2, 5, even 10 years. Think of a home as a long term commitment and plan accordingly. Whatever you do, don’t tempt yourself with homes outside of your budget. Falling in love with a home you can’t afford will only cause frustration and may even cause you to stretch beyond your means financially.
TIP: Use our Mortgage Calculator at the bottom of our home page to get a rough estimate of the monthly payment you can afford.
2. Skipping pre-approval.
Now that you have considered the cost, your bank and you may disagree on what you can reasonably afford. Before you start visiting open houses, make sure that you are pre-approved for a loan. Pre-approval involves verifying your credit score, income and assets. While this is still not an absolute promise of a loan, it is a solid basis for home-shopping. You might even check your credit score prior to pre-approval in order to catch any mistakes that may be on your credit report.
3. Being too picky.
You’ll definitely want to make a list of needs and wants – and be specific. However, you should use caution: don’t think that you’re going to buy your dream home on the first try. First time home buyers often have to make compromises due to limited funding, so you may need to accept some outdated cabinetry or give up the extra bathroom. Identify what items are truly deal breakers and realize that you may need to make some exceptions if you don’t want to continue renting for too long.
4. Foregoing professional help.
Once you’re in serious home-shopping mode, you’ll want to have someone on your side who can speak the real estate language. Talk to friends and family who have purchased recently and see what agents they’ve worked with. No recommendations? Feel free to ask a potential agent to provide references – your agent should be someone you trust. REALTORS® have intimate knowledge of the local housing market and communities, as well as a plethora of professional contacts. And since all agents in a transaction are compensated by the seller, there’s really no reason to go it alone.
A word of caution: It may be tempting to use the Listing Agent of a home as your agent also. One stop shop, right? In reality, however, it’s best if you have a REALTOR® of your own. The Listing Agent will be concerned with the needs of the sellers, not just you, which may end up in a less than stellar deal when all is said and done.
5. Becoming emotionally invested.It can be so easy to walk into an open house and picture your furniture in the living room, your kids playing in the backyard, and fall madly in love with the home of your dreams. While you should certainly be excited by the prospect of homeownership, you should also be reasonable. Allowing emotion to cloud your judgement could blind you to serious flaws with a property. Additionally, there are a number of things that could potentially cause a sale to fall through, such as issues found during inspection. Put away your rose-colored glasses, keep a level head, and wait until the ink is dry on the contract before you jump for joy.