So, you’re looking to buy your first home. Congratulations! While this may be a very exciting time, it can also be pretty stressful and overwhelming. At the end of the day, you just want to have a home that you love at a price you can afford. But as a first time home buyer, you are more likely to face some challenges that go beyond the ugly wallpaper in the master bathroom. To make sure you are as prepared as possible here are a few of the most common mistakes you should avoid as first time buyers.
1. Not hiring the professionals
This may seem like a given, but too many first time buyers fall into the trap of thinking they are saving money by not hiring an agent. In the long run, this will end up costing you. Don’t be afraid to do a little research or ask for recommendations from friends and family for a good agent. Or learn more about The Reed Team here. You want to make sure that you find someone who can give you professional advice. You want to have someone with more experience with home buying on your side… and that doesn’t just go for your agent, but your loan officer or broker too.
2. Too much or too little on the down payment
The down payment is one of the biggest challenges new homeowners will face. And knowing how much to put down can be tricky. If you put too much down you’re going to end up risking using up all of your savings and being cash poor. And you definitely still want to have a little nest egg saved up. However, if you know you are in a position to put a 20% or more payment down, you avoid paying Private Mortgage Insurance (PMI), and end up saving on the monthly mortgage. That being said, it is not worth the risk of living on the edge if you are not sure. Try using this Mortgage Calculator.
3. Not getting pre qualification/pre approval early
Now that you’ve decided you’re ready to buy a home and you have an agent, your next step should be to get a pre approval letter from a lender. You will need this to show that you are taking this process seriously and are financially able to purchase a house. If you wait until after you’ve found a home you love, you risk getting too emotionally attached and making a bad financial decision. Plus the earlier you are approved means you can act fast when making your offer, and can catch and correct errors in your credit report in time. And Pro Tip: don’t get any new loans before the deal is closed. Lenders like to run credit reports before closing, and anything that has changed can effect can jeopardize the deal.
4. Skipping inspection
Before closing on a sale, do not forget to have a home inspection. If the home has issues, you want the seller to fix it or even lower the price. Too many first time buyers tend to be too apprehensive to ask the seller to make any repairs, but these are the things you need to know. You don’t want to buy a house and find out later that there are unexpected repairs that could have been prevented with an inspection.
5. Not knowing the full cost of homeownership
Buying a new home is expensive. A common mistake first time buyers can make is buying a home that’s too expensive. What you can afford depends on your debt to income ratio, an ideal DTI is about 36% for mortgages. But there is more to home owning than just buying the house and mortgages. It’s smart not to forget about HOA fees, property taxes, insurance, even landscaping costs. Even if you are prepared for all of the additional costs, property taxes and insurance tend to rise every year. Additionally, if you are used to renting, you will now be in charge of your own maintenance and the costs that come with it. Having enough saved also extends to after closing the deal. Its recommended to have about 3-6 months of expenses saved up. You never know what will happen!
As long as you do your research and are prepared, you can avoid these common mistakes that many first time home buyers are guilty of making. Home buying is already a big deal, but it doesn’t need to be a difficult one too. Make your home buying process as easy as possible, contact The Reed Team today!