10 Common First-Time Home Buyer Mistakes
Kristen wrote a really nice post about 10 common first-time home buyer mistakes. It is so important to know what not to do as you prepare for homeownership.
Great post!!
So you've decided you want to become a homeowner...but you don't know the steps you need to take. I've covered some of these steps in previous blogs, but it's also helpful to look at the mistakes to avoid. Here's a checklist of 10 things to avoid doing during your house hunting:
1. Not checking your credit report and score.
It's good to know early on what condition your credit is in. If there are marks on your credit that need to be disputed, it's better to know NOW then when you are ready to get pre-approved. That way you can take the necessary steps to get your credit nice and sparkling. Most of the online credit services will give you a free report once a year, and they even provide a "button" to click on if there is something to dispute.
2. Not getting pre-approved.
This is a mandatory early step, because without it, you don't know the price of house that you should be looking at. Why fall in love with a $400k house when your budget only allows for a $250k.
3. Not creating a long-term budget.
Make sure that your housing expenses (mortgage, taxes, insurance) don't exceed 30% of your income. And factor in general maintenance expenses that will need to be addressed each year. Putting aside a couple to a few hundred dollars in your budget each month for those little unexpected things (or the big ones!) will prove invaluable. Remember, you can't call the landlord anymore!
4. Forgetting about the hidden costs.
This ties in with #3, but also refers to the costs to close on your home. Make sure that escrow provides you with a sheet that tells you what all your fees will be. This should include escrow fees, appraisals, reports, and lender fees, among other things.
5. Not seeking professional help.
You certainly can buy a house without a real estate agent, but it would be silly! You don't pay the agent's fees -- the seller does -- and using an agent can save you a ton of money on your home purchase. Not only can they negotiate the price better than most non-real estate agents could, but they can also negotiate who pays for what (home inspection, pest inspection, transfer tax, Natural Hazard Zone Report, escrow fees, etc.) Is that something you feel comfortable doing yourself? In addition, they have E&O insurance and know the ins and outs of the Residential Purchase Agreement. The handshake purchase is the biggest mistake you could make!
6. Picking your real estate agent and lender blindly.
Like any profession, there are good agents/lenders and bad ones. There are ones that are ethical and ones that aren't. Seek the referrals of friends and relatives. Or make sure you ask plenty of questions. And just because an agent or lender is "new", doesn't mean they can't be good. Many new agents and lenders are so "fired up" about their new career that they have a passion and work ethic that far exceeds the "old jaded" ones! Just make sure they are educated, helpful, good communicators, and have some sort of system in place to help you in your home buying process. I'm happy to interview agents for you anywhere in the country (at no charge, of course). Just email me and we'll discuss it.
7. Thinking you'll get everything on your "wish-list".
There are "must haves" and "would like to haves" on everyone's list. Prioritize what is really mandatory for you. Then itemize the "bonus" criteria. When you find a house that has all of your must-haves, evaluate how many of the "wishes" it has. If it's got a couple, it's probably a good one to act on. No house is PERFECT. Not even a brand new one that you build for yourself!
8. Being too emotionally attached before you hire the home inspector.
Before you buy all the new furniture for the house and have it decorated in your mind, hire a home inspector! They will advise you on the things that need to be addressed to bring your home up to a safe standard, if it isn't already. Your agent can then negotiate on your behalf to get some things repaired, if possible (side note: REOs and Short Sales almost never do repairs). And remember, don't freak out if there is a long list of things to repair...the inspector's job is to FIND things wrong, so even a brand new "perfect" home will have some "flaws."
9. Not researching the neighborhood.
Make sure you feel safe in your neighborhood. Check out www.meganslaw.ca.gov if you live in California. This will tell you if there are any sex offenders in your neighborhood. Imagine yourself walking home at night...are you nervous or comfortable? Is there a lot of traffic? What do the police and school authorities say about the area? Do your homework now so you don't regret it later!
10. Not considering the resale value of your home.
When many people buy a new home they think, "this is where I'll live forever." It's that "new relationship" phenomena. But as our lives and needs change, so does our relationship to our home. What once worked in terms of size and function may no longer be perfect for you. Ask your agent how your home stacks up against resales. Just because it works for you, doesn't mean it will be easily marketable to others. See what your agent says and follow their advice.
I hope these tips on avoiding first-time homebuyer mistakes are helpful to you!
Good luck in your home search!
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