First-time home buyers can be overwhelmed by the challenges that come with purchasing property, so it’s important to do your research and make the right moves at each step of the process. If you make these five common mistakes when you’re looking to buy your first home, you may end up losing out on a great deal or falling behind in the process, both of which could cost you time and money in the long run. To avoid these mistakes and other difficulties that can come with home buying, pay attention to these 5 first-time home buyer mistakes and how to avoid them.
1) Not Knowing Your Budget
Do your homework before you start house hunting. Know how much you can afford, and know what your mortgage process will cost you. Do not confuse prequalification and preapproval; they are two different things. Skipping the home inspection can lead to major problems with your new place, so don't do it! Finally, budget for closing costs when shopping for a new home. Closing costs are typically 1% of the purchase price or higher. They include items like title searches, attorney's fees, appraisal fees, surveyor's fees and more. The good news is that these expenses can be paid over time as part of your mortgage payment. Be sure not to forget about them in all of this excitement!
2) Not Getting Pre-Approved For A Mortgage
The first mistake many people make when purchasing a home is not getting preapproved for a mortgage. It's important to know your financial limits before you start looking at homes and to be honest with the lender when they ask how much money you want to spend on the house. Having a good credit history will also help your chances of securing the loan, which can be especially difficult if you've never taken out a mortgage before.
The next mistake people often make is confusing prequalification and preapproval. Getting pre-qualified means that the lender has looked at your income, debt and credit report and determined that you are qualified enough to take out a mortgage loan within specific guidelines. You can get this information from most lending institutions without going through an application process or interview with an agent.
3) Failing To Research The Neighborhood
Failing to research the neighbourhood you are thinking about buying a home in is one of the most common first-time homebuyer mistakes and it can be difficult to understand why. It's not just about the house itself, but also about the surrounding area. What is there to do? What does your commute look like? How safe is it? Do you want to raise a family in this neighbourhood? All these questions will help you decide whether or not this is an area worth investing in. Being well-informed will not only make you more comfortable with the purchase, but it may even save you money if you find out something important before signing on the dotted line.
4) Skipping The Home Inspection
A good home inspection can often uncover hidden problems that you may not have been aware of. Skipping the home inspection will leave you unprepared and could cost you a lot of money in the future. You want to be as informed as possible about what's under your feet, so make sure you budget for a home inspection before moving forward with the purchase. It is also important to know the difference between prequalification and preapproval because they are not interchangeable terms. Preapproval means an offer has been submitted and a lender has agreed to lend up to a certain amount while prequalification means you have given information on your financial situation, but an offer has not yet been submitted. The final first-time buyer mistake is skipping the home inspection.
5) Not Understanding The Total Cost Of Ownership
The first mistake that many first-time homebuyers make is not understanding the total cost of ownership. By this, we mean not considering all the costs of owning a home, such as mortgage payments, property taxes, insurance and maintenance. The average homeowner spends more than $2000 per year on these items. Buying a home can be expensive, but by being informed about the process and the potential costs, you can avoid making costly mistakes. The average American pays around $1500 in property taxes every year; insurance for your new home will also be around 1% of your annual salary or income; and you'll also need to budget for closing costs, which are usually around 3% to 4% of your purchase price.
To help figure out how much house you can afford, visit the site Housing Affordability Calculator where they'll give you an estimate based on information like your credit score, down payment percentage and monthly debt obligations.