Blog > Top 10 First-Time Home Buyer Mistakes To Avoid
Whether you're a first-time homebuyer or purchasing your next home, I've seen these mistakes made by both. With this list of common mistakes home buyers make, I hope to help you avoid costly issues and come out ahead of the game when purchasing your home.
By Ashley Melton, Realtor®
1. Not Getting With a Mortgage Lender First
This is my number one rule when house hunting. Buyers need to know what they qualify for to set their budget and the seller is not going to look at an offer without a mortgage pre-approval letter. If there are multiple offers on the table, there may not be time to get with the lender and compete with them.
2. Hiring the Wrong Agent
A home buyer, whether first-time or veteran, needs to take the time to research and hire the right real estate agent. Having an agent with local knowledge and experience is key. A great real estate agent should be easy to talk to, communicate with quickly and have knowledge of the ins and outs of the area you're interested in to guide you in making the best decisions. If you're interested in learning more about picking the best Realtor® for your needs, check out my guide to making the best choice HERE.
3. Making the House Fit
As a home buyer, you're probably going to have a list of wants and needs. It's easy to get frustrated when the right home hasn't come along yet. I've seen buyers try to make a home "fit" as their stress levels rise. My best advice is to wait for the right house. You don't want to make such an important purchase, only to regret it once you're in the home and realize things aren't working for you.
4. Overlooking Location Issues
Overlook location at your peril. A classic example is a busy street. You may not realize the amount of traffic you'll see if you're unfamiliar with the location, but your agent should be knowledgeable about this and point it out. Busy streets can be a problem for kids and pets, and will also be an issue when it's time to sell. Listen to the advice of your agent.
5. Getting Hung Up on Cosmetic Imperfections
Buyers often get hung up on cosmetics and find it hard to see past them. For example, paint colors are a big hurdle for some. Though most people don't enjoy painting, it's a cheap way to transform the space and gives instant gratification. Try to keep the home's potential in mind when making your considerations and ask your agent whether or not a concern can be addressed in negotiations.
6. Buying More House Than you Can Afford
This one seems like a broken record the number of times you've probably heard it. But, you'd be surprised how easy it can be for buyers to fall head over heels for a home that stretches the limits of their budget or how much home they're approved for. With the current real estate market, there's stiff competition for desirable homes with many being sold above asking price making it increasingly easier for buyers to find themselves in a tough financial situation later. Your budget should factor in your other monthly expenses, not just the asking price of the home - sticking to your guns and instead focusing on a monthly payment in a price range you can afford will prevent a lot of headache down the road.
7. Overlooking the Hidden Costs of Homeownership
Like I mentioned in mistake #6 above, there are other factors to consider with your home purchase besides the purchase price of the home. These extra costs can add up quickly and eat up your finances, causing issues in other areas of your life you may not have accounted for. For example, your home may come with higher property taxes due to location, higher utility bills to heat, cool and maintain due to size and don't forget about homeowners insurance, closing costs and possibly HOA fees. These are all items a good real estate agent should be able to advise you on during the house-hunting process so you're not depleting your savings or emergency fund to make the monthly mortgage payments.
8. Not Getting with a Mortgage Lender First (yes, it's here twice)
Finding a great, knowledgeable lender (in addition to finding a great real estate agent) is so important in preparing yourself for the home buying process I put it on this list twice. A great mortgage broker will help you understand if you qualify for first-time homebuyer programs which can help you save money with your purchase. They'll make sure you understand the difference between pre-qualification and pre-approval and which one you need. And they'll also advise you on common mistakes of home buyers like making large purchases or applying for credit after your offer is accepted. These things increase your debt and negatively affect your credit score putting the purchase of the home in danger of falling through.
9. Paying PMI (or more than you have to)
To be clear, having this on my list doesn't imply that paying PMI is something to avoid. In fact, PMI can help home buyers who have a hard time pulling together the 20% down payment to get their loan. Many first-time home buyers pay private mortgage insurance, which is fine. What I do want you to avoid is paying too much. You want to notify your lender when your mortgage is paid down to 78% of your home's LTV or "Loan-to-Value" ratio. Your PMI may automatically be cancelled when you owe 78% of the home value but it does depend on the type of loan you have. So, making sure you're both on the same page and aware of approaching that number will prevent you from paying any more than necessary.
10. Letting Emotions Make Important Decisions For You
Believe me, I get it. Purchasing a home is one of the biggest investments you'll make in your lifetime so it stands to reason emotions are going to get involved. The problem is that because it's such a big investment, you need to think clearly and make sound financial decisions based on the facts in front of you. Otherwise, there'll be a lot more emotions to deal with later on and not the good kind.
Stay Focused, Stay Stress-Free
As of this writing, it's clearly a seller's market and buyers are making offers over asking price because it's harder to find homes due to low inventory and it being "...very difficult to replenish or add to supply. Existing homeowners in many cases are staying put, particularly the ones that are older." The Washington Post. But, some of these offers are going to stretch buyers very thin over the long term because they've made the decision to bid more than they can actually afford. Set a budget. Stick to it. Stay focused. Let finances and facts dictate decisions, not your emotions.
At the end of the day, buying a home isn't something that should raise your blood pressure or give you nightmares. This is an exciting time for you! Just having a few key things in place along with the right mindset will allow you to enjoy the home-buying process the way you should be: Stress-free and fun.
I hope this list helps you in your home buying journey. If you have any questions, please drop me a line and ask - I'd love to hear from you!
And if you'd like to learn how to make the best offer on a home in today's seller's market, check out my blog post about that HERE.
Ashley Melton, Realtor®
www.CharlestonPalmettoHomes.com
843-670-2333