Purchasing a residence is exciting as well as overwhelming. While it’s tempting to breeze through the many steps in order to finally own a home, it’s necessary to fully understand the home buying process so you can make informed decisions. First-timers in particular are susceptible to a number of mistakes that can have detrimental long-term consequences. Before buying your first home , check out these common home-buyer mistakes and how to avoid them.
Going over budget
It seems so simple, yet many first-time home buyers enter the process without figuring out how much they can really afford to spend, i.e., crunching the numbers. If you’re not sure how much you can really afford, your wasting your time looking at houses. You’ll either A) pick a great house and end up being disappointed after finding out you can’t afford it, or B) reduce your range of potential options for houses by setting your price ceiling too low. To figure out what kind of house you’ll be able to afford, use an online mortgage affordability calculator .
First-time home buyers should err on the side of caution, making sure monthly mortgage payments don’t leave you “house poor” (unless you really want to make that sacrifice). If you’re considering hiring a contractor to build a home, meet with them beforehand to talk about your budget range. Some contractors offer fixed-price house and land packages to accommodate home buyers from a variety of financial backgrounds.
Not saving beforehand
Before jumping into the process of buying a home — which essentially means taking out a huge loan — make an effort to pay off previous debt, especially credit card debt, and focus on creating an emergency fund . Since owning your own home means paying for repairs and renovations, having some extra cash will provide you with a sense of financial security in the event of unforeseen costs after the closing.
In addition, since many mortgage programs don’t require a large down payment, many homeowners fail to wait until they have enough savings to make a significant down payment. In a 2018 NerdWallet survey , one in nine homeowners under the age of 35 agreed that they should have waited to make a bigger down payment.
While how much you contribute to your down payment is a personal preference, a bigger down payment means a smaller mortgage and more manageable monthly payments.
Failing to do research
First-time buyers often fail to thoroughly research the costs of repair and renovation before purchasing a house. Instead, even after they paying for an inspection and being confronted with a series of necessary fixes, home buyers often obtain unrealistically low repair estimates from a single contractor.
In order to avoid this mistake, James Ramos, owner of a real estate brokerage firm in Tampa, Florida, recommends doubling estimates. In addition, reading testimonials and reviews from previous homeowners can help you make a more informed decision. For instance, if you’re looking to install a deck, read PVC deck installer testimonials in your area.
Although buying your first house can seem like a stressful and lengthy process, you’ll be able to call yourself a homeowner by the end of it. All in all, ensuring that your house is within budget, saving up beforehand, and conducting research will lead to financially sound decisions and save you headaches in the long-term.