Buying your very first home is exciting, but it can also be frustrating and full of stress. That’s because the process is fairly complex, especially since you’ve never gone through it before. One of the ways to make the process easier and less stressful is to understand the common mistakes that the first time home buyer makes. Here are some of these mistakes and what you should do to make certain you avoid these costly errors.
Taking on More than You Can Afford
One of the biggest mistakes you can make is buying a home you simply cannot afford. Even if you are approved for a large mortgage, you need to make certain you can make your monthly payment without stretching yourself too much financially. This includes planning for future debt. If you’re going to start a family soon, have a child go to college, or need to buy a new vehicle, you need to take that cost into consideration.
It’s also important to remember that just because you’re approved for a certain amount doesn’t mean you have to spend that much. Just because you’re approved for $200,000 doesn’t mean you need to spend that much.
Not Getting Pre-approved
The pre-approval process answers a couple of questions. First, it tells you if you can get a mortgage. Second, it tells you how much you can borrow. You don’t want to find your dream home only to learn that you can’t afford it. Getting preapproved not only gives you a budget to work with, but it also tells sellers that you’re serious about any offer you put in on their property.
Not Shopping Around
You don’t have to go with the first lender you talk to. In fact, you don’t even have to use the lender you get a pre-approval letter from, though it does make things easier. Be sure you compare lender interest rates and any special incentives they offer. Lenders should be willing to provide you with information regarding all of their fees and costs, too, so you know exactly what you’ll be paying. Experts suggest gathering information from at least three lenders before selecting one.
Putting Off Buying a Home Because You Don’t Have a Huge Amount of Savings
Just because you don’t have a huge amount of money in savings doesn’t mean you can’t buy a home. The idea that you must have a down payment of 20% is no longer true. In fact, some programs require a down payment of less than 5% of the purchase price. There are also programs out there that will help you with the down payment if you qualify. Don’t put off owning a house just because you don’t believe you have the savings.
Don’t Drain Your Rainy Day Fund
At the same time, you don’t want to empty all of your savings just to make the down payment. You always want to have a little bit of money held back for an emergency. Draining everything you have to make a down payment can leave you vulnerable to unexpected costs. What would you do if your car suddenly broke down or you ended up in the hospital? Keep a little bit of money in reserve, even if it means you need to wait several more months in order to save up for your down payment.
Buying the First Home You See
Just like with every other major purchase you make, you want to be sure you shop around. You might walk into the first home your real estate agent has lined up and fall head over heels for it. That’s great, but don’t put in an offer immediately. Instead, look at several more houses. Ideally, you’ll look at a few dozen homes. You may still return to the first house you looked at, but you will know it’s the one for you.
Recognize that Perfection Doesn’t Exist
Unless you’re building a home, chances are that you won’t find a property that is 100% perfect. It may need a little work, or it may not have the yard you want. You may not like how the kitchen is laid out or the size of all of the bedrooms. No house is going to be completely perfect. Instead, look for homes that meet all of your “must-haves.”
If you find a house in the right location, is the right size, fits your budget, and meets all of your needs, don’t pass it by just because you hate the carpet. Be ready to do a little cosmetic work or even renovate a room or two if you can find a home that meets all of your other needs. Otherwise, you could be looking for a house for years.
These are just a few of the most common mistakes first time home buyers make. Avoid them, and you’ll find yourself walking into your new home in no time!