You’ve been working for years, building up to become a first time home buyer, but now that you’re here, you decide what advice to take or cast aside.
There’s a lot of information out there for new buyers that turn an exciting time into an overwhelming experience.
Consider these 5 common first time home buyer mistakes to avoid next time you feel overrun by options.
First Time Home Buyer Mistake #1: Don’t Set a Budget or Go Over Budget
According to Forbes, the five expenses that will consume 50% of your lifetime earnings are: home, car, children, education, and retirement.
Don’t make the mistake of going over budget and breaking the bank. It’s natural to get distracted by shiny fixtures and luxurious amenities, but a broken budget will breed headaches for years to come.
Instead of creating a must-have list first, and a budge second, do the opposite.
Construct a realistic budget before considering home features to save yourself the trouble of falling in love with a house outside your budget. A general rule of thumb says that your maximum price resides around 3 times your yearly salary.
In addition to income, factor in spending habits, debts, savings, and your credit score to draw a fully practical picture. However, if you take advantage of Iowa’s first-time home buyer programs, or have a hefty down payment in place, that figure can change.
Either way, use all the resources and figures available to set a budget you’re comfortable with.
First Time Home Buyer Mistake #2: Lack of an Emergency Fund
Remember that budget you made earlier? Does it include emergency funds?
If you don’t include added expenses to your budget, the total monthly payment can exceed what’s in your wallet.
In addition to a mortgage savings account, it’s helpful to have a separate stash for maintenance, property taxes, repairs, and insurance.
Especially for folks here in Iowa, you never know when snow and ice will appear and crack the foundation or overwork the furnace.
First Time Home Buyer Mistake #3: Forget to Get Pre-Approved for a Mortgage
House hunting without being pre-approved is like car shopping at a closed dealership. You can look all you want, but when it comes time to buy, you’re left searching.
According to Bankrate pre-approval is when, “The lender verifies the borrower’s information and documentation to determine exactly how much it would be willing to lend to that borrower.”
Pre-approval is a vital part of the home buying process. If you send an offer without getting pre-approved for a mortgage beforehand, chances are your offer won’t be taken seriously, or moved to the bottom of the pile.
Gather pay stubs, tax forms, W-2’s, bank statements and credit scores and present them to a lender.
It’s really THAT simple!
Once your documents are pre-approved, you’ll be seen as a serious buyer, and you’ll raise your chances of getting your offer accepted.
First Time Home Buyer Mistake #4: Hire a Real Estate Agent without Proper Research
It feels good to have someone in your corner. That’s exactly where the right real estate agent is during the home buying process.
An agent guides you home while ensuring your best interests stay intact along the way, but not all agents are equal.
First-time buyers often choose the first real estate agent they meet or a recommendation without properly vetting them first. If one chooses the wrong representation, buyers can end up overpaying, misunderstanding, and misguided.
The best way to find your perfect real estate partner is to interview several potentials. Consider the following to conduct proper research.
One important quality to check is their area expertise. As an Ankeny and Des Moines real estate agent, I understand the advantage of partnering with someone who understands the local market like the back of their hand.
Not only will you be the first to see exclusive properties, but you’ll also get the best information on each neighborhood’s unique qualities.
On top of being well-informed, you should choose an agent who keeps your budget top of mind. Negotiation is a skill separates the good from the best agents. Pick a partner who’s skilled in negotiation, and who consistently cares for your best interest.
First Time Home Buyer Mistake #5: Wave Contingencies without Studying Risks
It’s a competitive market. I have the pleasure of working with buyers in Ankeny and Des Moines and know first hand the lengths they’ll go to for the home of their dreams.
Although the market continues to move quickly, I never recommend clients to wave contingencies to increase their offer desirability. Don’t skip inspections.
When you submit a pre-approved offer, you don’t have to cut corners such as making an offer that’s not contingent on financing or inspection.
The solution for this first time home buyer mistake is simple.
Consult with your real estate agent or lawyer before submitting an offer without contingencies, or, the better option being to rely on your pre-approval letter and real estate agent’s negotiation skills to move you ahead of the competition.
Although these are 5 common first time home buyer mistakes I see often, they’re easily avoidable when you consider the simple solutions.
I understand that the process is overwhelming for a new buyer, so if you ever have any questions, feel free to call or email me. I’m here to help bypass missteps.