When the decision is made to buy a home, it’s all too easy to jump right in and start looking at homes for sale. Unfortunately, there are many mistakes that first-time homeowners make which can have disastrous or expensive results. Instead, before jumping in, learn more about the common mistakes first-time homebuyers make and how to avoid them.
Looking Before Applying for a Mortgage
The first thing most people do when they’re ready to buy is to start looking at homes. This isn’t a good idea – it’s all too easy to fall in love with a home that’s too expensive, too big, or has other issues, and then it may be hard to find a home that has everything but is affordable, as well. Apply for mortgages first. After getting a pre-approval from a lender, then start looking at homes and stick with ones that can be purchased with the pre-approval amount.
Not Speaking to Multiple Lenders
Many homebuyers will only speak with one or two lenders. It’s true that applying for mortgages can take time, but this is time well spent. A different lender may offer a lower interest rate or other beneficial terms, which can translate to thousands in savings over the life of a mortgage. Speak with as many lenders as possible before making any decision. Mortgages have different terms and interest rates depending on the lender, so shop around to get the best deal.
Buying an Unaffordable House
It’s incredibly easy for people to over-budget for a house. Just because a lender approves the homebuyer for a certain amount doesn’t mean they need to, or should, spend that amount. Avoid stretching the budget so thin it’s difficult to make the payments each month. Do a detailed budget and follow it for at least a few months to make sure it’s actually affordable. If it’s not, look for a more affordable home that will fit the budget better.
Opening Credit Lines Before Closing
A pre-approval is based on the homebuyer’s current credit score. If the homebuyer opens credit cards or credit lines right before the closing, their credit score could lower, and that could mean the lender backs out at the last minute. The homebuyer may need to give up on the home or shop, fast, for a new lender, even if that means a higher interest rate.
Do not make any large purchases, open credit cards, or open a line of credit before the closing. If a line of credit or credit card is needed after the home is purchased to cover repairs or other expenses, open it at least a few weeks after closing on the house to be safe.
Not Being Prepared for Repairs
Repairs are inevitable for homeowners. There’s no longer a landlord to handle them, so it’s important to save aside some money for these when they happen. Unfortunately, too many homebuyers end up using all of their savings to cover the home’s purchase or fail to save money for things that may need to be repaired in the future.
Keep money set aside for home repairs that may be needed. If something does come up, it’s better to have the money on hand and repair it quickly, before the issue gets a lot worse.
Failing to Get an Inspection
When the market is moving fast, many new homebuyers will put in an offer and state they wave the inspection as a way to get the attention of the seller. This is never a good idea. Even if the buyer is experienced and knows what to look for, it’s still a good idea to have an extra pair of eyes look at the home.
Most new home buyers do not have any idea how to detect major issues like foundation movement and may end up purchasing a home that requires thousands of dollars in repairs before they can move in. Always have an inspection done. Avoid waving the inspection period just to look better for the seller. If they insist on waving the inspection to be able to purchase the home, pick out a different home.
Buying a home may be at the top of your to-do list, but that doesn’t mean it’s a process that can be rushed. Even if the market is moving fast, take the time to avoid making mistakes here. This could help you purchase a home you’ll love and allow you to make better decisions so you don’t waste money or time on a home that’s not right for you.