First Time Buyer Mistakes To Avoid
In this video I’m going to cover 6 home buying mistakes to avoid if you are a first time buyer. Make sure to watch till the very end as I will have a bonus tip for you.
So let’s get started:
Mistake 1: Not looking at the big financial picture
Besides the money required for the downpayment, you’ll also need to pay closing costs such as title fees, escrow fees, attorney fees, insurance and more.
Now, depending on your lender, you may be required to “impound” 2-6 months taxes and 12-14 months insurance premiums upfront. I’ll talk about impounds more in depth in another video but just know that this may be a requirement.
Also consider living expenses and major purchases that will occur in the first year of ownership.
It’s not uncommon to have a large repair due to deferred maintenance by the previous owner; I’m talking about a water heater, AC problem, roof repair, or maybe you’ll just want to purchase new appliances like a refrigerator, clothes washer or dryer.
Mistake 2: Hiring the first realtor you meet
A good realtor is essential to guide you through the maze of a home purchase. Interview several agents that have been referred to you and find one that you are comfortable with because you may be working with that person for several months.
Tempting as it looks, going it alone with your cell phone can lead to disaster. Local experts with years of experience will help you spot things in the house or neighborhood that you won’t even be looking for and will help you avoid services that are unnecessary and costly.
A good question to ask the agent is how well they know the area that you are searching. Consider not only the schools but also community amenities and proximity to major streets, freeways, tollways and transportation options, shopping, recreation and entertainment.
Mistake 3: Waiving the inspection
Home inspections can tell you a lot about a home and will note any safety concerns. While these inspections can uncover many items, not all things that are called out are necessarily deal breakers. Go over the report with your agent and decide what repairs are most important and make a request to the seller. Just don’t expect a seller to fix everything on a report.
Home Inspectors can also be tricky to navigate. First off, Inspectors are not regulated or licensed so anybody with a ladder, a flashlight and a business card can call themselves a home inspector. There are a few certifying agencies that have a codes of ethics and standards of practice guidelines so look for these when picking a company.
Mistake 4: Choosing the wrong lender
This is a tough one because first time buyers usually have to rely on a third party referral for help in picking the right one. Lenders come in a variety of flavors and each will offer different options. Bank lenders typically have strict requirements and offer a limited choice for their loans, so any variations in your situation may disqualify you from getting one of their loans.
Mortgage brokers, on the other hand, represent many different lenders and offer loans from many different sources that could work for you. They represent institutional lenders, private funds, banks, etc and can be beneficial especially if you have less than perfect credit history. One more source to consider is a credit union.
Another factor to consider is how efficiently the lender can complete the loan. Delays in processing could cost you money or even the whole deal!
Mistake 5: Not having your financials prepared
Before even looking at houses with your agent, you need to have your financial records ready and available. Have two years of tax returns ready as well as two months of pay stubs and bank statements. One or more of your bank statements should show the money needed for the down payment and upfront costs.
Once you’ve met with a mortgage professional who has reviewed your records and given you a pre-approval letter, you can begin looking at homes. If you don’t know how much house you can afford, you will just waste a lot of time and end up disappointed because you fell in love with a home you couldn’t afford.
Mistake 6: Buying a house before you’re ready
Because of the enormous financial responsibility that comes along with owning your own home, you really need to consider if you are ready to move forward.
I'm not just talking about having enough income to make the payments. You also need to have a home-owners mentality and be ready to accept the responsibilities that are headed your way.
You will not be able to call the landlord when the plumbing backs up in the middle of the night and you’ll have to sharpen your handyman skills or be ready to open your wallet when you routine maintenance needs to be performed.
You may be required by the community to keep you yard and building in good condition. Painting, landscaping and basic repairs are all part of the homeowner experience.
So these are my Home Buying Mistakes to Avoid.
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And I’ll see you on the next video.