Avoid These First-Time Homebuyer Mistakes
Buying a home for the first time is a huge step in anyone’s life. It’s a decision that can move you closer to financial stability, or take you further away, depending on the choices you make during this critical time. Here are some common mistakes to avoid on your way to owning a piece of the American Dream.
Draining Savings for a Down Payment — There’s a difference between intentionally saving money to be used for a down payment and using all the savings you’ve accumulated so far to fund the down payment. Intentionally setting a savings goal and reaching it before you start looking for a home will put you on more solid financial ground than depleting all your savings and not having anything left to fall back on in case of emergencies.
Not Getting Professional Help — When you buy a home, you are entering into a complex financial and legal arrangement. It’s not something people should attempt to do on their own; especially if they’ve never bought or sold real estate before. At a minimum, you will need to consult a licensed real estate agent, a mortgage professional and in some states, a real estate attorney, to help you facilitate the transaction. Ask friends and family to give you the names of real estate professionals they know and trust to make it easier to choose.
Not Getting Pre-Approved — The first step in the home-buying process is getting pre-approved for a mortgage. There are several reasons for this. One is so that you know how much house you can afford so you can begin your home search armed with that knowledge. Another is because many real estate buyers’ agents don’t want to spend their time working with someone who isn’t pre-approved. You may not even be able to start looking at houses until you take that critical step.
Assuming Pre-Approval Means the Mortgage is Guaranteed — Getting pre-approved for a mortgage doesn’t guarantee you will eventually get the loan. Critical mistakes between pre-approval and final approval could derail the whole process. Lenders are looking for financial stability, and will check your credit again before closing. Once you’re pre-approved, you have to be very careful not to do anything to raise a red flag with your lender. Stay the course and be hyper-aware of every dollar you have coming in and going out. It’s not the time to get a new job, open more credit cards, buy a new vehicle or decide to go back to school.
Ending Up ‘House Poor’ — Many first-time homebuyers end up buying more house than they need or can really afford. They assume that if they can make the mortgage payment, they will be in good shape financially. What they don’t take into account are the many additional costs of homeownership including higher utility costs, landscaping, property taxes, ongoing maintenance, and more. Ideally, you should go for a little less house than you can afford and leave some wiggle room in your budget so you can actually enjoy owning your home, rather than being financially strapped every month.