10 Common First-time Homebuyer Mistakes to Avoid
A whirlwind of activities happen when you are buying your first home. If you are not focused, it is incredibly easy to get swept away and make the common first-time home buyer mistakes that you are better off avoiding. Learn how to avoid the mistakes below and save as much as you can while getting your first home.
- Viewing homes before getting a mortgage.
Get pre-approved for mortgage before looking for a home. This protects you from overstretching your budget or falling in love with a house that you cannot afford.
- Not shopping around.
You are losing thousands of dollars if you commit this first-time homebuyer mistake. The more you shop around, the better your basis for comparison. Talk to at least three lenders and mortgage brokers. Compare rates, lender fees, loan terms, customer service, and lender responsiveness. Eventually, yhe best deal will reveal itself.
- Overextending your budget.
Stick to what you can afford. Focus on what monthly payment you can afford rather than fixating on the maximum loan amount you qualify for.
- Rushing the process.
Buying a house can be a long and tricky process. This is why first-time homebuyers are prone to committing common mistakes. They get impatient or overly excited – and pay the price in the end. Better to plan at least a year in advance and take your time to save for the downpayment, fix your credit, and understand the processes with a realtor and lender.
- Emptying your savings.
If you make at least 20% downpayment, you do not have to pay mortgage insurance. But if this means draining all your savings, it is not worth the risk of living on the edge. Always have an emergency fund!
- Slacking with credit.
Your credit report will be pulled again before closing so never be careless with your credit. Keep the status quo in your finances from preapproval to closing.
- Choosing house over neighborhood.
No amount of a home’s cosmetics will satisfy you if you end up in a neighborhood you hate. This will determine your quality of life and family development. Avoid this mistake by visiting the neighborhood at different times, learning about its crime stats and school ratings, gauging the commute and traffic, assessing neighbor interactions, and feeling the overall vibe of the area.
- Assuming you need 20% down payment.
Some families just find it hard to afford this rate. Check your options. In some cases, you only need as little as 3% down payment. There are also local or state housing programs that may offer assistance to you as a first-time home buyer.
- Overlooking hidden costs of homeownership.
Your monthly principal and interest payment are only the beginning. It is a common first-time home buyer mistake to miscalculate other costs like property taxes, mortgage insurance, homeowners insurance, hazard insurance, repairs, maintenance and utilities. Crunch the numbers in advance and make sure you have enough cushion in your monthly budget to avoid going in the red quickly.
- Forgetting about homebuyer rebate.
This is an obscure concept to first-time homebuyers and a big mistake to forget. This is a rebate of up to 1% of the home’s sales price that comes out of the buyer agent’s commission. Negotiate with your agent at closing. This is a substantial amount of money that is worth asking after you bought your first home.