With another busy season here, many people will be looking now to buy their first home. This will be an exciting time but also a stressful one with a lot to think about. If you fail to do your homework you could end up paying too much or with a lemon. To help you prepare, here are the five worst first-time homebuyer mistakes to avoid.
Not Getting Preapproved for a Mortgage
Before you start your search, one of the most important things to first do is getting pre-approved for a mortgage. This is crucial for a number of reasons. For a start, it shows sellers that you’re a serious buyer and that you can put your money where your mouth is. It’ll also let you know how much you can expect to borrow and boost your confidence that you’ll receive a mortgage.
Getting preapproved (which is different from getting prequalified) requires you to go to a lender and provide all your financial information. The loan officer will verify your employment, check your credit score, and compile all your financial information. You’ll then receive a quote for what you can expect to receive. Doing this early lets you lay the groundwork for getting prequalified later. Additionally, it lets you know what your price range is. You’ll also find out if whether you have any issues that could hold up receiving a mortgage.
Not Hiring a Real Estate Agent
You might think you don’t need an agent, but this is where many people are mistaken.
Buying a home can be a rather complex and time-consuming business. Having an agent by your side will mean you’ve got someone who knows the entire process and can devote themselves full-time to the search. Having a guide that can answer your questions and give advice will make you far more confident when it comes to evaluating different properties. Buyer’s agents will also know the local market better than anyone and have access to the local MLS (multiple listing service). This means they can immediately find you homes that match your criteria and are within your budget.
Once you do find a home that you’re ready to make an offer on, your agent can advise you on what’s a fair offer to make and represent you in negotiations. Best of all, you won’t have to pay a dime out of pocket for their services. That’s because buyer’s agents take their commission from the proceeds of the sale. Whether you hire an agent or not means you’ll still be paying as if you had hired one. Therefore, it makes no sense to forgo their services.
Not Conducting a Thorough Home Inspection
When negotiating an offer on a home one of the most important contingencies to include is the home inspection contingency. This allows you an easy and painless way out of the contract if the inspection finds any problems. Or it compels the sellers to fix the issues before the sale can move forward. The cost of a home inspection is usually a few hundred dollars and is typically paid by the buyer.
Everyone likes to save money but with something like a home purchase, this is something you absolutely shouldn’t cheapen out on. A thorough home inspection by a qualified inspector will uncover any hidden issues that may not be apparent at first. Unless you want to end up with a lemon, it’s strongly advised that you don’t wavier the home inspection contingency.
Not Having Enough Emergency Savings After the Sale
A home purchase will be one of the most important financial decisions you’ll ever make. As such, it makes sense to put as much into that down payment as you can. However, don’t make the mistake of putting all your money into the purchase and leaving little left to act as an emergency fund. You never know what can go wrong and the last thing you’ll want is for the air-conditioner to break down during a record-setting heatwave. An emergency fund will help cover any unexpected costs like this and ensure that you aren’t always stressed out about money.
Increasing your down payment by just a few thousand dollars typically won’t make much impact on your mortgage payments. Better to keep some of it in reserve in case disaster strikes.
Buying More House Than You Can Afford
Home hunting is an emotional time and it’s easy to get fixated on a home that’s a little over your budget. It might be tempting but overextending yourself can lead to enormous regret later on. A worst-case scenario would be falling behind on mortgage payments and having your home repossessed. Play it safe and focus on what monthly payments you can afford rather than fixating on the maximum loan amount you qualify for. Just because you can qualify for a $200,000 loan doesn’t mean you should buy a home for that exact amount. Think about what your monthly mortgage payments will be and find something that’s well within your means to pay.