As a first-time homebuyer, you’re looking forward to that moment when you walk into a house and know it’s “the one.” But before you get swept away in the excitement of choosing your first home, it’s important to slow down.
1. Not getting a mortgage pre-approval
Before you even start looking for homes, you need to know what the bank is willing to lend you. By doing so, you won’t waste time considering houses well outside your price range. And when it comes time to make an offer, the seller will consider you a serious buyer, which helps if there’s competition.
Just remember that mortgage pre-approval isn’t the final step. You’ll still need to complete the application process when you’re ready to buy. And the mortgage amount isn’t set in stone. For example, if you finance a car or add credit card debt in the meantime, the bank might reduce your eligibility.
2. Not knowing your financial limits
Now that you have a mortgage pre-approval, it’s important to understand that what the bank can offer you and what you can afford are not the same. You don’t want to start looking for a new home based solely on the mortgage pre-approval amount.
First, look at your income and expenses. How much money will you have coming in each month? And what are your anticipated bills? Don’t forget to budget for additional costs that you may not have now – like property taxes, homeowner’s insurance, maintenance, and utilities. You’ll also need cash for the closing costs, typically 2-5% of the home’s price.
Lastly, think about how your down payment amount will affect your monthly mortgage payment. The less you put down, the higher your monthly mortgage will be. In addition, if you can only put down 19% or less of the home’s sale price, you’ll have to pay private mortgage insurance (PMI) to protect the bank against risk until you reach 20% equity in your home.
3. Not knowing what you need in a house
It’s especially hard for first-time homebuyers not to get caught up in fancy features. But overlooking the more practical aspects can be a major problem down the road. This is where an experienced real estate professional can be of most help. They’ll ask the right questions to get you thinking about both short-term and long-term needs. They also have insights about the neighborhood to make sure it’s a good fit for you and your family.
Be sure to create a list of must-haves and nice-to-haves. This will keep you focused and help your agent line up potential houses to save you time.
4. Not seeing a home’s potential
If you’ve ever watched House Hunters on HGTV, you see it all the time. Homebuyers find it difficult to see the potential of a home when it’s covered in another person’s decor or cluttered with stuff. The wallpaper might be hideous, but it’s a quick fix. That room might look small, but it’s actually crowded with oversized furniture. Real estate agents are experts at seeing past this – and helping their clients through it.
5. Not getting a home inspection
Don’t rush into a deal without a home inspection. Home inspectors can identify potential problems such as black mold, termites, faulty wiring, faulty plumbing, insufficient insulation, and defective heating or cooling. If the inspector finds issues, you can negotiate repairs or a price reduction. If the problem is too big to fix, you can walk away from the contract.
If you’re a first-time homebuyer, the experienced real estate professionals at BHHS Fox & Roach are ready to help you navigate the home buying process, so you can make smart decisions for you and your family.