7 First Time Home Buyer Mistakes to Avoid
Buying your first home can be a scary and exciting experience all at once. It can seem like a daunting task, but educating yourself and surrounding yourself with the right team prior to starting the process will set you up for success. Below are 7 common, first time home buyer mistakes and tips on how to avoid them throughout the process.
1. Shopping for a house before getting pre-approved
Many first-time home buyers make the mistake of jumping right into the home search before ever speaking to a mortgage lender. It’s important to discuss your finances with a mortgage lender prior to viewing any properties so you have an accurate budget and know what you can truly afford. Lenders will take into account your credit history, credit score, debt-to-income ratio, employment history, and all assets and liabilities. Based on these factors, a lender will provide an honest budget to work with. Not to mention, having a pre-approval letter will show sellers you’re serious about purchasing a home.
2. Only talking to one lender
Like most big purchases in life, you should shop around for a mortgage. All banks and lenders offer different loan types and programs and charge different fees. You should compare at least 2-3 quotes to determine the best option for your situation. When comparing options, consider the following factors: down payment, interest rate, loan origination fees, closing costs, and private mortgage insurance, to name a few.
3. Assuming you have to pay a 20% down payment
One of the most common misconceptions of buying a home is the idea that buyers must pay a 20% down payment. That couldn’t be further from the truth. In fact, there are a multitude of programs currently offering 0-5% down payment options. Buyers don’t need as much upfront cash as they think!
4. Making big purchases or applying for credit prior to closing
When you’re in the middle of the loan approval process, it’s best to leave your credit alone. As tempted as you may be to open a Lowe’s or Home Depot credit card to purchase all new appliances, it’s best to try to resist the urge until after closing. Applying for credit can affect your credit score, which can affect the loan process. Purchasing large items on credit will also affect your debt to income ratio, which could prevent the loan approval altogether. If you absolutely must make a purchase prior to closing, please discuss the situation with your lender to ensure the approval process won’t be affected.
5. Not visiting the property multiple times
I always recommend visiting the home multiple times during the due diligence period. You don’t always notice everything during the first walkthrough. Visit the property a second and third time to check out every nook and cranny. Look through the home and measure the rooms to make sure all of your furniture will fit. Drive through the neighborhood and surrounding areas at various hours to ensure you love the location during the day and at night. If possible, visit the property on a rainy day to ensure there are no leaks and the home’s gutters and drainage systems are working properly. Buying a home is a huge decision, so you want to know exactly what you’re getting yourself into.
6. Purchasing a home that is difficult to resell down the road
Don’t ignore resell value when purchasing your first home. It may not matter to you now, but it will absolutely matter in the future. Is there a train a few hundred yards away from your property? Is the property on or near a busy road? Does the community require exorbitant HOA fees? These are factors that may make the home difficult to resell and should be taken into consideration when purchasing the home.
7. Not factoring in closing costs and moving expenses
Many buyers make the mistake of only focusing on the down payment when preparing to purchase a property. Unfortunately, this is not the only out of pocket expense associated with the buying process. Other costs include the due diligence fee, earnest money deposit, inspections, appraisals, land surveys, lender fees, attorney fees, and closing costs to name a few. On top of that, moving typically costs money. Whether you plan to hire movers or rent a truck to do it yourself, there’s almost always a cost associated with the moving process.
Each of these mistakes are common among first time buyers, but they’re also easy to avoid when you’re working with the right REALTOR® and lender.
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