You’ve saved up, gathered all your strength to start the process, and excitedly told your family and friends that you’re ready for your first home.
Before diving in and looking at your options – or settling on that “perfect” place you’ve always had in mind – it is important to cautiously navigate the waters of the competitive housing market. Rash decision-making or choices made under pressure could potentially be a bad move on your end in the long run. Not only do your actions as a homebuyer set the pace, but may also incur long-term debts or regrets.
Below are five common mistakes that first-time home buyers make, but can be easily diverted with mindful consideration of the circumstances at hand.
This may seem like a self-explanatory prerequisite for becoming a homeowner: planning ahead. However, it’s a common error to jump in without organizing your priorities. While location is a definite factor, other things can be more or less difficult to change to your liking.
Your immediate needs may be fulfilled by the property you have in mind, but what about 5 or 10 years down the road? Are you likely to flip the house, or will you plan to live here for a long time? Many buyers also make the mistake of avoiding the option of renting altogether, which can be a more viable long-term option if home buying seems too big of an expense.
Many of the estimated home values that potential buyers find online can be inaccurate. While several sites give a snapshot overview of the property’s situation, it is important to talk to an experienced realtor who knows the market and area well. External factors influenced by a house’s location can add value to or devalue a property in ways that the Internet cannot determine simply by its neighborhood or geographical placement.
Additionally, there is often a general assumption that a home’s value tends to appreciate over time. This is not always the case. Acquiring home equity may seem worthwhile until adding in calculated costs that contribute to upkeep, which can range from maintenance repairs to repainting the exterior. Property taxes, mortgage insurance, homeowner’s insurance, and utility bills are additional costs that buyers often overlook. If the main motive of owning a house is to make profit, one must remember that a house is not liquid and can be difficult to sell if immediately needed.
As a guideline, you should consider the fact that loan officers may have different sets of standards. Interest rates may vary, origination fees might not exist, and upfront costs could potentially be calculated into your total balance. These factors all determine the types of loans you want to buy.
Be sure to review the terms and conditions of your loan fees. It’s helpful to work with a lender and ask them questions about things you don’t completely understand or feel unsure about. FHA loans ask for at least 3.5 percent down from borrowers, while VA loans come at a cost of $200,000 without private mortgage insurance (PMI) fees and no down payment. A lender will help determine which one is right for you.
The right lender will not only advise you on the loan type that’s most beneficial, but also works hand in hand with your real estate agent. They will likely look at your debt-to-income ratio in order to determine your credibility for mortgage payments – smoothing over the lending process in turn. The right real estate agent will have a good grasp of the housing market and will be familiar with the general area.
You’ll want to ensure that you choose the right home inspector and attorney as well. While some choose to forego inspection to “save,” this move can be costly. Material defects that inspectors find can constitute damages in thousands of dollars if not properly patched up. Homebuyers can easily overlook these flaws. Good inspectors can also provide valuable insights regarding other important things that will go into the care and maintenance of your house.
Before chasing your HGTV dreams, taking a step back to assess how your home can best be repaired or refurbished is a smart move. Instead of taking the cash out to tear down the pre-existing interior, it’s recommended to feel out the living quarters for at least a few months in advance.
This way, it’s easier to envision your fixing needs in order of immediacy and desire. Additionally, mortgage payments and operational costs of the house may come unexpectedly higher than planned. By budgeting your remodeling fund in accordance to these initial fees, you’ll get a better estimate of what you’re willing to spend on remodeling.