Buying a home can be scary, thrilling, and confusing if you are a rookie in the housing market. Rather than try to pretend like you know what is going on, it is always helpful to do some research on the market before you dive in. We have made a list of the top 7 mistakes first-time buyers make when searching for a home so you can begin this process a little more knowledgeable and prepared for what might come.
1. Exceeding Your Budget
This one is coming in at one of the biggest mistakes because it could affect your financial future for a long time. It might seem a little surreal to be dealing with such large numbers. When you are operating with five and six-figure numbers, a jump from $130,000 to $150,000 may not seem like a big deal, however, when the monthly statements start coming and you realize your payments are either devouring your income or seem to never end, those numbers might not be as insignificant as you once thought.
Buying a home is a major financial and life investment, but it can be done in a smart and strategic way. Your first step should be to get pre-approved for a mortgage. This will give you a ceiling for the money you can spend and it also looks good to both agents and sellers.
One last important note is that you do NOT have to spend the entire loan you have been approved for. Try to still be frugal and smart with how much you borrow because you will eventually have to pay all of that back with interest and you might be able to shave off years of payments by having a bit of self-control at the point of purchase.
2. Buying Even When You Plan on Moving Soon
Job markets are changing and growing all over the country. Los Angeles was the tech capital for a while and now that has expanded to Seattle, New York, and Texas’ beloved Austin. If you are in a career that has potential to uproot your life in the near future, stay away from the home buying market. The rest estate game is a tough one to play sometimes, and you could end up with a major headache (and a financial loss on the home) if you buy and then have to turn around and immediately sell.
3. Forgetting to Add up Other Costs
You have got the keys and an anxious excitement to move into your new house and start a new chapter of your life. But wait! You need a new couch and a new and bigger kitchen table. Hey! While we are at it, let’s finally get that cocktail bar that is hidden inside a globe with the crystal decanter! Not so fast! Filling your house with furniture and basic necessities is a cost that should not be overlooked in the purchasing process.
On top of that, keep in mind the maintenance costs (you won’t pay a landlord for that anymore), utilities to keep an entire home functioning, and property taxes. To add to that, you will have to get homeowner’s insurance, most likely pay a Homeowner’s Association fee, and closing fees for when you finally get the home (on top of moving fees to leave your current residence).
All of these should factor into the initial budget and should be taken into account when landing on a safe number to take out a loan and a price point for purchasing the house.
4. Failing to Have a Thorough Inspection
When the housing market is fast paced, it might be appealing to just skip the inspection and put in an offer to see if you can land the deal before anyone else. But don’t! The inspection might be one of the most important parts of home buying because it can both project maintenance costs for future repairs and give you a very good idea of any issues with the home that need to be addressed.
You need to know what kind of shape the house is in and the right way to do that is to hire a licensed home inspector. These people will point out the things that the everyman will miss and note if the damages are minor or could be used for leveraging a better deal. Water damage, cracks in the foundation, and faulty wiring are just a few things they would be able to point out to you before you jump into a deal that could make or break your investment.
5. Being Too Picky
It is perfectly okay to want your dream home. However, if you aren’t building that home from scratch, you might not get everything you want. Make a list of things you want in a home, and then divide those into must-haves and would-be-nice-to-haves. If you are a rookie homebuyer, chances are your pickiness will be limited to your budget. Maybe the first home is not the dream home and that is just fine, we do not want to exceed our budget for grandiose dreams that do not match our income.
However, there are some things you must not compromise on if you have a plan for the future of this house. If you get a two bedroom home and start having children then you might end up in a tough position wishing you had looked for a three or four bedroom with room to expand instead of looking at your life in the moment. Be smart about your decisions and know that buying a house is also making a home.
6. Letting the Emotions Do the Buying
They always say to not go to the grocery store hungry, but what are the rules for home buying when you live in a run down rental? This can be a very emotional process and you have to remember to keep those emotions in check while you make rational decisions for the future.
Above all, try not to fall in love at first sight with homes you view. This can lead to either major upset when you don’t get the house or a foolish decision to overbid. You want to be able to have a home that you can raise the value of. This way, when it’s time for you to sell you can profit from your investment. Rash decisions in the beginning can lead to a mortgage-life’s worth of buyer’s remorse.
7. Not Selecting the Best Real Estate Agent
Right out of the gate make sure you have representation when home shopping. Find someone who is a full time agent and knows the local inventory well. Their knowledge in the history of home values in the area will help when planning your investment in addition to imagining how the neighborhood will change over the course of your ownership.
You’ll also want to have an agent that is available and able to act quickly on deals. There is peace of mind in knowing your agent is almost always available to talk because they are just as involved in this process as you are.