Buying a new home doesn’t have to be hard. But it does take a fair amount of research, preparedness, and patience to do it right. As REALTORS®, our goal is to help buyers make smart choices, and give them an edge in a competitive marketplace. Still, we see a lot of first-timers who rush through the process without help from a pro, or who don’t take the right steps to prepare for what’s ahead. Here are five of the biggest mistakes that home buyers make when they take-on their first home purchase.
1. They Don’t Hire an experienced REALTOR®.
REALTORS® are helping people buy homes every day, so they’re extremely knowledgeable when it comes to the home-buying process. Typically, they have access to new listings as soon as they are posted, making it possible for you to get in on good deals before anyone else even knows about them. REALTORS® also have access to relevant statistics and trends, like the current values homes are being sold for in particular areas of the neighborhood. Not hiring a REALTOR® can put you at a real disadvantage when looking for an affordable, move-in-ready home in your price range. Oh, and in Florida, hiring a REALTOR® is free for the buyer. It’s the seller who will pay the buyer’s agents’ commissions.
2. They Don’t Fully Grasp How Much Money is Needed.
All too often, first-time home buyers make the mistake of thinking that as long as they can afford their monthly mortgage payment, they are going to be okay financially. There are several out-of-pocket costs during the home-buying process: the mortgage down payment, cost of the home inspection, and closing costs. They also forget to factor-in ongoing costs of homeownership such as homeowner’s insurance, utility bills, property taxes, maintenance expenses, and all the necessary and inevitable repairs needed by every home over the years. Buyer’s agents and mortgage specialists can help you consider these costs, and most mortgage brokers will help you estimate a realistic monthly budget that takes these added expenses into account.
3. They Don’t Get Pre-Approved for a Mortgage.
Wanting a mortgage and qualifying for one are two different tasks. If you’ve never purchased a home before now, you may not realize the importance of becoming pre-approved for a loan before you start looking at houses. Not only does this step show you how much you can afford to borrow, but it also shows sellers that you have the financial backing to purchase their homes. These days, most buyer’s agents won’t commit their time to showing you homes or negotiating on your behalf if you don’t already have pre-approval. And usually, sellers won’t consider offers from buyers who aren’t pre-approved.
4. They Make Big Purchases Before Closing on the Home.
While a mortgage is the largest expense first-time home buyers face, closing costs and the expense of bills associated with owning a home are also substantial. If you buy furniture, appliances, vehicles, and other items before you make a settlement, you may find yourself short on cash when the time arrives. Even if you obtain a loan to make these purchases, you may discover that you can’t afford to pay both this loan and the mortgage once you move into your new home. The fastest way to de-rail your loan approval is to change your debt/income ratio by making large purchases with credit, and even with cash.
5. They Don’t Put Away Extra Money.
An unexpected medical emergency or the loss of employment can be all that it takes to reverse that feeling of happiness & security you feel with the purchase of your first home. Not putting aside money to cover such an emergency is one of the biggest mistakes new homeowners make. It’s dangerous to commit every penny of your savings toward the down payment on your home. Plan to keep at least a few thousand dollars in reserve in case the unthinkable happens. You should also consider future home maintenance and repairs. In fact, home maintenance and repairs can cost thousands annually. For example, it can cost thousands to replace an A/C unit, or replace an old roof, and major appliances tend to go at the worst possible time. These expenses have to come out of the homeowner’s pockets, so you should prepare for this and think ahead. When the mortgage payment comes out, homeowners should set aside an extra 1% of that payment into a savings account, earmarked for maintenance and repairs. This way, they have an emergency fund they can dip into when the worst happens. If homeowners don’t use this money, it can be put onto the principle to pay their home faster. Or, the unused money can be invested into upgrades or renovations to help homeowners increase their home’s value.
If you’re thinking about purchasing a home, it is essential to take the time to prepare for success. While you may not be able to avoid all of the obstacles on the path to owning your own home, you can certainly reduce their impact by being prepared. Review your finances thoroughly, get professional assistance, and choose wisely for the best results. Let’s GO Get it!