First-time home buyer mistakes are pretty common in the beginning, but luckily they’re easy to fix once you know what to look out for. If you’re going through the home buying process for the first time, be sure to avoid these 10 common mistakes that first-time buyers typically make so that your experience goes as smoothly as possible and you don’t have to come back again and pay more in the future.
Not Hiring a Real Estate Agent
Challenges for first-time buyers include not hiring a real estate agent, making assumptions about the housing market, and not knowing how to find the perfect home. Hiring an agent will help you navigate the process of buying a home with more ease. Assumptions will only lead to disappointment when they don't come true. And researching before you go can be crucial to finding the perfect home in a competitive market.
Not Getting Pre-Approved For A Mortgage
One of the biggest challenges first-time buyers face is not getting pre-approved for a mortgage. Even if you find the perfect home, you might not be able to afford it without being pre-approved and knowing what your budget looks like. The National Association of Realtors' website offers online calculators that can help you figure out how much house you can afford.
If you have a low credit score or are buying with someone who does, applying for pre-approval can increase your odds of approval by up to 45%.
There are also lenders who specialize in financing for people with lower credit scores and some who provide loans specifically for first-time home buyers (though these will likely come with higher rates).
Not Knowing How Much Home You Can Afford
One of the first challenges for first-time buyers is understanding what they can afford. There are many variables that go into this, such as the down payment amount, credit score, and monthly expenses. Depending on what you've been able to save so far and your monthly obligations, you may be able to afford a smaller home now and upgrade later. If not, there's no need to panic: with a little creativity, you may be able to come up with other ways of saving more money or paying off debt in order to buy a larger property. It's always best to consult with a mortgage broker or lender before making any decisions about how much house you can afford!
Not Understanding The Mortgage Process
The mortgage process can be challenging for first-time buyers, but the best thing to do is educate yourself before you start looking for a home. The more you know about how mortgages work, the less likely it is that you will make a costly mistake.
Some common challenges for first-time buyers include:
- Failing To Put Enough Down Payment: Putting down as little as possible on your house may seem like the most cost-effective option, but when interest rates rise or you need money to repair your house or take care of any other unexpected expenses, this could leave you in financial trouble. Putting 10% down will give you access to government programs and private mortgage insurance programs which allow you a lot more flexibility with your finances in tough times.
- Thinking Closing Costs Are Included In The House Price: There are closing costs associated with buying a house. These are typically 2% - 3% of the purchase price, which means they have to be paid by the buyer up front instead of rolled into the mortgage. Avoiding this expense can lead to cash-flow problems in the future.
Not Doing Your Research on the Neighborhood
One of the most difficult challenges for first-time buyers is choosing a neighbourhood. There are so many things to think about, but it's important not to make decisions too quickly. Have you ever driven through a neighbourhood and thought, that doesn't look like the type of place I want to raise my kids? That should be your first sign that you're in the wrong area. It may take some time, but it will pay off in the long run.
Not Being Aware of The Total Costs of Homeownership
The challenges for first-time buyers are many and varied, but one of the most common mistakes is not understanding the total costs of homeownership. When you're a homeowner, you have to pay property taxes and insurance, utilities, and maintain upkeep on your home. All these things take money out of your pocket each month which can feel like a challenge with tight budgets. With so many monthly expenses, it's important that you don't overcommit to other monthly expenses that will cut into your monthly income and make it harder to keep up with what needs to be paid. Taking on too much debt in order to purchase a home also can cause financial challenges as interest rates increase.
Not Having a Contingency Fund
One of the biggest challenges for first-time buyers is not having a contingency fund. If you don't have enough savings to cover a $1,000 emergency, it may be too risky to take on the responsibility of being a homeowner. Ideally, your financial resources should be at least six months' worth of expenses (including your mortgage payment) and include liquid assets such as cash and stocks.
Making an Emotional Decision
The challenges of being a first-time buyer can make it difficult to make an emotional decision because you're worried about what other people will think. The first thing you should do is take your time and go through the process of buying a home as if you were going to live in it for a while. Make sure you don't rush into anything. The first thing you should do is take your time and go through the process of buying a home as if you were going to live in it for a while. After that, set up an appointment with one or two different real estate agents who are familiar with homes in your area. Once you find the house that's perfect for you, then start asking questions: What's included? How much does this cost? What are my options? What are my monthly payments?
Not Getting a Home Inspection
One of the most common mistakes first-time buyers make is not getting a home inspection. Even if you're not totally sure about doing this, it's worth it for your peace of mind. A home inspection will identify any problems with your house and give you an idea of what you are in for before you purchase it. It can also save you a ton of money by telling you if there are major repairs that need to be done right away or soon.
Failing to Negotiate
Challenges For First-Time Buyers: Failing to Negotiate One of the first things to do when buying a house is negotiate with the seller. It's important that both parties are flexible and willing to compromise. If you're not willing to negotiate, then it's a good idea for you to look for another property. Remember, this is your chance to get a great deal on your new home. Don't let this opportunity slip away!