We are all familiar with stories of people buying their first homes and later regretting it. Maybe they wish they had waited longer, maybe they find homeownership surprisingly burdensome, or maybe they realize later on that they overpaid. Indeed, owning a home is not easy. It is one of the most important decisions one could make in life, and it requires a lot of commitment. It is even more difficult and challenging for real estate newbies.
If this is your first time buying a home, do not worry. Below are the 9 most common mistakes first-time homebuyers make and how to avoid them. Keep these in mind, and your home buying journey will be as smooth as it can be.
1. Not taking your time to research
Buying is exciting, but it can also be challenging if you are not prepared. Knowing that you want to buy is not enough. Knowing what is out there in the market and what kind of property you want is key to a pleasant buying experience. Start the process by researching as much as you can. If you already know where you want to live, conduct a search on websites like RealtyHop to see what types of residential properties are available. By doing so, you become more educated about the local real estate market and you get to think about what you really want. Indeed, a big beach home with amazing ocean view sounds amazing, but perhaps a three-bedroom apartment that is only 10 minutes away from your office is a more realistic option?
2. Forgetting about the hidden costs
If you have done some research, then you know buying is not just about the price. A buyer has to budget for the broker’s commission, closing costs, legal fees, inspection, insurance, maintenance, as well as property taxes. These costs are not always listed explicitly when you buy, but they can become burdensome over time. To make sure that you factor in the hidden costs, create a spreadsheet and track all possible expenses. If inserting functions in Excel is not your expertise, no worries. There are many easily accessible resources online. Keep in mind, also, that your broker might be able to help you.
3. Not working with a broker, or, hiring the wrong broker
It is not uncommon to see people buying or selling without a broker. Indeed, if you are an innate negotiator and a seasoned buyer, you might find hiring a broker unnecessary. But even the most experienced buyers make mistakes, not to mention real estate virgins who know nothing about the buying process. To hire the right broker, make sure you interview at least three people from different firms and ask them about their marketing strategies, available resources, as well as the number of clients they have currently, as the more clients they have, the less time they have for you. Also, avoid hiring a seller’s agent even if he or she offers to help. A seller’s agent is hired to serve the seller, not you.
4. Failing to be pre-approved for a mortgage
Getting pre-approved for a mortgage can be extremely beneficial in terms of speeding up the buying process. The last thing you want as a homebuyer is to be forced to give up on your dream home because you are not pre-approved. You are far more tempting in the seller’s eyes if you already have a mortgage option in place. Be mindful, however, of the timeframe. A pre-approval is in general valid for 60 to 90 days, and while you can always complete the re-verification after it expires with additional documents, it is ideal that you close the deal while your pre-approval is valid to avoid potential issues.
5. Choosing the wrong mortgage
Next thing on our list is perhaps the most important component of homeownership. Carrying a mortgage is no joke. Your home can be foreclosed if you cannot make repayments on time, and it can take up to 30 years to repay the debt. It is, therefore, imperative that you spend as much time as you need to shop around for the right mortgage. Many first-time homebuyers rush into this step without enough research, and they, later on, regret their impulsive decision. A 30-year, 4.75% amortization loan from a local credit union might sound like a good deal. But hey, it does not hurt to call other banks to find out if you can get better interest rates.
6. Going over your budget for the “dream house”
Many first-time homebuyers, after compiling a dream list for their first home, become fixated on the idea of owning the perfect home. For example, many are willing to spend thousands of dollars more just to get a floor-to-ceiling window in the master bedroom. Remember, a big part of homebuying is about compromising and knowing when to let go and when to fight for what you want. It is unlikely that you will get everything on your wish list. What is more important here is that you stay within your budget (i.e. have a home), make repayments on a timely basis (keep your home), and budget for home improvements in the future (and finally, have your dream come true).
7. Spending too little time inspecting the property
No matter how much you trust the seller, inspection is a must when it comes to home buying. A home inspection is a process of assessing the condition of a property. You as a buyer can also learn a lot about the home you are about to buy through inspection. There might be small cracks on the roof that could cause leakage in the event of a heavy rain. Or, perhaps, the mold and mildew stains are all hidden under the carpet.
8. Forgetting to take the neighborhood into consideration
When it comes to choosing the right neighborhood, most people think about safety, crime rates, school districts, and demographics. But at the same time, living in the wrong neighborhood could be detrimental for your social life and overall lifestyle. Imagine bringing your two-year-old toddler to the park and only seeing senior citizens chilling on the bench. Yeah, probably not so amazing.
9. Not thinking about the future
Last but certainly not least, the future. Moving one year after buying your first home is unlikely something you would want to deal with after paying the broker, the lawyer, the inspector, etc. Ask yourself if you are ready, and be sure to consider all possible factors. Are you satisfied with your current job? Do you plan on having kids in the next couple of years? Do you see yourself living in the same place for the coming 5 to 10 years?
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