5 Mistakes to Avoid as a First-Time Home Buyer
Buying a home is stressful enough for experienced veterans, but those doing it for the first time may feel the weight of the world on their shoulders. Since you’re going in unpracticed, it’s important to educate yourself on some common mistakes other first-time buyers have made—and possibly save thousands in the process.
Paying more than you can afford
There’s a lot to consider when determining your price range. While it seems simple—setting a price range for yourself and assessing your goals are important first steps. If you don’t come up with a fixed amount, you’ll end up wasting time touring homes you can’t realistically afford. You’ll need to consider your annual income, the money you’ve saved, any debt you’re already handling, your credit score, and many other factors.
Everyone wants their dream home, but you also don’t want to break the bank. Work with your financial advisor to come up with a reasonable budget for your new home before you start looking. That way, you’ll avoid falling in love with the 7,000-square-foot, seaside villa that’ll have you knee-deep in debt for years to come.
Not preparing for the mortgage process
Unless you plan on paying in cash, you’ll need a mortgage. The average homeowner spends about 30% of their monthly income on housing expensenses, while the average mortgage lasts anywhere from 15-30 years. This might seem overwhelming in itself, but it’s important to be thorough when searching for a mortgage that’s right for you. Finding the right mortgage may be a tricky process even with a good credit score, as it involves reading the find print, comparing many different lenders, and researching the mortgage lending landscape. A financial advisor has already done their homework and could make the process much simpler.
Weak offers and negotiations
While it’s important to be frugal in your total expenses, you’ll also need to make a strong offer. Sellers will be sifting through multiple offers, weighing amounts and contingencies. While you’ll ideally want to settle with a conservative offer, it’s important not to lowball. Work with your real estate agent and financial advisor to come up with a reasonable offer and then don’t be afraid to negotiate!
Not budgeting for closing costs
With the stress of negotiating and searching for a mortgage, the closing costs might slip your mind. In total, buyer closing costs range from 3% to 5% of your final purchase. This might not seem like much, but depending on the price of your home, the closing costs could land you well 0ver budget. Don’t be blindsided by closing costs and remember to factor these into the overall budget. This may be the difference between a stress-free closing and a frantic rush to find some extra cash.
Overlooking the extra costs of homeownership
You’ve closed on your home, settled on an appropriate mortgage, handled any closing costs, and departed ways with your real estate agent. Now what? It’s important to remember all the costs that go into homeownership. You’ll have move-in fees; rooms will need to be painted; the dishwasher will need replacing. The list goes on. In fact, many recent home buyers say maintenance and other costs were much more expensive than anticipated. Always account for a good chunk of expenses after move-in and factor these into your overall budget.
Buying a home for the first time doesn’t have to be scary or overwhelming—nor does it have to break the bank. Seek the advice of experts at Personal Finance Advice to come up with a first-time home buying plan that’s right for you!