Buying your first home can be a very intimidating and stressful process. While it is exciting, searching for your first home is often overwhelming.
In addition to being a significant financial commitment, it’s easy to feel pressure as you likely want to find a place that you can call home for the foreseeable future. As a result, it’s easy to feel like you have to find the perfect home as quickly as possible.
This pressure often leads to first-time homebuyers making common, avoidable mistakes that lead to them spending more money than necessary and not being happy with their final choices.
To help you avoid some of these extremely common mistakes, here are some of the missteps that first-time homebuyers make and how they can be remedied.
Not Getting Prequalified
You probably have at least determined a budget for your first home; however, what you think you can afford isn’t necessarily the same as what mortgage providers think you can afford. Banks are taking on risk when they lend you money to buy a home, so they are likely to take a conservative approach when determining how much you can afford—especially if you have poor credit.
For this reason, you should be sure to get preapproved for a mortgage before you begin house hunting. After all, you don’t want to find the perfect home in the perfect location and have it taken away from you because you aren’t able to qualify for a loan. Not only will you be wasting your time, but you’ll also be wasting the seller’s time and your agent’s time.
Getting prequalified for a home loan will help you establish a more stable budget when looking for your first home.
Not Understanding Your Alternative Loan Options
Aside from standard bank loans, potential homeowners should be aware of the government-insured loan programs that are available to them. These loan programs can help individuals with poor credit and/or low income get a loan with fair interest rates without putting down a sizable down payment.
The FHA loan program helps individuals with low credit get loans through FHA-approved lenders. While these loans offer low down payments, they do require mortgage insurance to be paid annually and at closing.
The USDA home loan program is meant to help low- and moderate-income households purchase homes in rural areas. Borrowers have to meet certain income requirements and purchase a home in an approved area.
Lastly, VA loans help service members, veterans and eligible surviving spouses become homeowners. Eligible borrowers can purchase a home without putting any money down or paying for mortgage insurance.
While these types of loans are only offered to individuals in certain circumstances, they can be a great alternative to bank loans for individuals who are eligible.
Overlooking Additional Expenses
Purchasing and owning a home involves a variety of additional expenses that you might have overlooked in your efforts to purchase a home as quickly as possible.
First, when purchasing a home, you should consider more than the down payment. Application fees, inspections fees, escrow fees, first year’s homeowners’ insurance and other closing costs may significantly increase your expected move-in expenses.
Once you have officially moved in, you’ll also be responsible for expenses beyond your mortgage and utilities. Other significant expenses include:
Insurance against natural disasters (often not included in homeowners’ insurance)
These expenses can easily add hundreds of dollars to your monthly expenses and should be considered when determining your budget. For example, according to Zillow, the average homeowner paid $2,800 in property taxes in 2012.
Rushing Your Decision
Purchasing a home can be a complex process, and rushing your decision is likely to lead to you overlooking important details and considerations. In spite of this, first-time homebuyers often rush their decision, as they are afraid of missing out on a good option.
Rushing the homebuying process likely means that you won’t have enough time to save up for an adequate down payment, repair your poor credit, research good real estate agents and more essential tasks.
Instead, you should be sure to begin preparing up to a year in advance. During this time, you can work on preparing yourself financially while researching locations and creating a list of what you want in a home.
Not Hiring an Agent
Yes, you should hire a real estate agent. Many individuals who have never been through the homebuying process think they can do it themselves.
First, real estate agents typically have access to listings that you won’t be able to find anywhere else. Your ideal home might be out there, but you might never know unless you hire a real estate agent. Moreover, real estate agents can help advise you on what areas you should avoid in an area.
Additionally, real estate agents have to adhere to ethical standards and must work in your best interest. This means you can trust them to negotiate the best deal possible on your behalf.
Be sure to ask friends and family members for referrals, read reviews and talk to multiple agents before hiring one.
Being a first-time homebuyer can be incredibly overwhelming and complex. As a result, inexperienced house hunters often make the same avoidable mistakes. Be sure to avoid the mistakes listed above when searching for your first home.