5 First-Time Homebuyer Mistakes (and How to Avoid Them!)
Buying a home is a complex process, and first-time homebuyers are particularly susceptible to certain mistakes.
Here are five of the most common first-time homebuyer mistakes (and how to avoid them!).
Mistake #1: Waiting for the “Right Time” to Buy
In an ideal world, we would have all purchased homes during the housing market collapse of 2009 when both prices and interest rates were low. But that may not have been the right time for you. Maybe you didn’t have the funds then. Maybe you weren’t ready to settle down yet. Maybe you were still a child!
Today, people may be telling you that interest rates are too high. The fact is, they only seem high because they’ve been extraordinarily low for the last 20 years. In the 1980’s people purchased homes with interest rates higher than 15%! When interest rates went down, they simply refinanced to get the lower rates. Buying today doesn’t lock you into today’s interest rates forever.
You might also hear people say that prices are too high, so you should wait for a market crash before you buy. This is terrible advice because there is no indication of a pending crash. Just because prices increase quickly doesn’t mean there’s a housing bubble that will burst. The fact is that recent gains are the legitimate result of high demand and low supply (unlike the previous market collapse, which was artificially inflated with shoddy lending practices). So even if there’s a small seasonal price dip in the local market, the higher prices are here to stay. Don’t try to wait them out.
Every month that you wait to buy is another month that you’re throwing money away on rent instead of building equity in a home.
Mistake #2: Waiting for the “Perfect” Home
No home is perfect. There will always be something slightly off about the layout, the finishes, or the location. If you wait for the perfect home, you will miss the home that could have made you perfectly happy.
The good news is that you can address many of these imperfections once you buy the home. Fixtures and finishes can all be replaced. Even layouts can be changed. Focus on buying a well-built home in a good location, and you won’t be disappointed.
Mistake #3: Starting the House Hunt Before Getting Pre-Approved
Getting pre-approved for your home loan should be the very first thing you do as a first-time buyer.
Getting pre-approved does two things for you:
- It tells you how much house you can afford. Knowing a hard number upfront will save you from falling in love with a home you can’t afford.
- It makes your offer stronger when you find your new home. Sellers want assurance that you’ll be able to qualify for the home loan before they accept your offer.
To get pre-qualified, you just need to complete an online application with the lender of your choice and provide them with your financials:
- Proof of income,
- Bank and investment account statements,
- And authorization to complete a credit check.
By this time tomorrow, you could be pre-approved and truly ready to start your home search.
Mistake #4: Underestimating closing costs
The down payment may be your biggest expense when buying a home, but it certainly won’t be the only one. First-time homebuyers often underestimate how much they’ll pay in closing costs.
Transferring real estate requires many professionals to complete tasks like:
- Home inspection
- Loan origination
- Title research
- Escrow services
- Notarizing documents
- Document transfers
- Etc., etc., etc.
Much of this important work is done behind the scenes, so you don’t have to worry about it. But you do have to pay for it. Expect closing costs to fall somewhere between three and six percent of the purchase price.
Side note: depending on market conditions, you might be able to negotiate to have the sellers help pay some of your closing costs out of the proceeds of the sale. This is something we can discuss as we look for the right home for you.
Mistake #5: Waiting Too Long to Get a Buyer’s Agent
With listings available online, most of today’s first-time buyers spend weeks or even months searching for homes online before contacting a buyer’s agent. And while it’s great that buyers are so well-informed today, spending any time on a home search without an agent is a big mistake. Buyer’s agents have industry connections that often alert them to new listings several days before the listings hit the market. So, getting a buyer’s agent in your corner from Day One gives you an edge over other buyers.
And remember, getting a buyer’s agent usually won’t cost you a penny! All real estate agent fees are typically paid by the seller. So, there is no reason to wait. You can contact me today for a free, friendly consultation. I can alert you to possible mistakes along the path to homeownership and prevent you from making them.