How To Avoid Mistakes As A First Time Home Buyer ?

Avoid Mistakes As A First Time Home Buyer

There’s no denying that mortgage rates and home prices are higher now than they were last year and that’s impacting what you can afford. “How To Avoid Mistakes As A First Time Home Buyer ?”. At the same time, there are still fewer homes available for sale than the norm. These are two of the biggest hurdles buyers are facing today. But there are ways to overcome these things and still make your dream of home ownership a reality.

As you set out to make a purchase this season, you’ll want to be strategic. This includes taking a close look at your wish list and considering what features you really need in your First home versus which ones are nice to have. This will help you avoid over extending your budget or limiting your pool of options too much because you’re searching for that perfect home.

To making a good decision in this challenging market is to be laser focused on what you and in the years ahead, . . . Another key point stretching your budget, as tempting as it

To help identify what you truly need, make a list of all the features you’ll want to see. From there, work to break those features into categories.

Here’s a great way to organize your list:

Must Haves :

If a house doesn’t have these features, it won’t work for you and your lifestyle. For example ,distance from work or loved ones, number of bedrooms and bathrooms, etc.

Nice To Haves :

These are features you’d love to have but can live without. Nice to haves aren’t deal-breakers, but if you find a home that hits all the must haves and some of these, it’s a contender.For examples, a second home office, a garage, etc.

Dream State :

This is where you can really think big. Again, these aren’t features you’ll need, but if you find a home in your budget that has all the must haves, most of the nice to haves, and any of these, it’s a clear winner. For examples, a pool, multiple walk-in closets, etc.

“How To Avoid Mistakes As A First Time Home Buyer ?”. If you’re only willing to tour homes that have all of your dream features, you may be cutting down your options too much and making it harder on yourself and your budget than necessary.

While you’d love to have granite countertops or a pool in the backyard, those are both things you could potentially add after you move. Instead, it may be best to focus on finding the things that you can’t change like location or a certain number of rooms. Then, you can upgrade or add some of the other features or finishes you want later on.

Sometimes the perfect home is the one you perfect after buying it.

Once you’ve categorized your list in a way that works for you, discuss your top priorities with your real estate agent. They’ll be able to help you refine the list further, coach you through the best way to stick to it, and find a home in your area that meets your top needs.

With the current affordability challenges and limited housing supply, you’ll want to be strategic so you can find a home that meets your needs while staying within your budget.

Common First-Time Home Buyer Mistakes To Avoid

Homeownership is usually exciting, but buying your first home can be particularly exhilarating. For many first-time home buyers, purchasing a house fulfils a lifelong dream. But this dream can’t be achieved without traveling down a road filled with potential potholes that may be difficult for first timers to see.

First-time home buyer mistakes are common, and while many aren’t a huge deal, some can be disastrous and lead to unwanted process delays and financial issues down the road.

1. Unnecessarily Delay The Approval Process

The home buying process tends to be exciting, so we understand the urge to jump in without much forethought ,but shopping for a home before getting initial approval also called pre-approval can be a big mistake.

“How To Avoid Mistakes As A First Time Home Buyer ?”. Taking the time to apply for approval upfront is beneficial to home buyers in several ways. For starters, getting approved is the simplest and most accurate way to determine how much house you can afford.

You may think you have a handle on all the costs associated with owning a home, but this isn’t the time to risk human error.

By getting your initial approval through a mortgage lender, buyers have a reliable price range to stay within, so they don’t set their sights too high or take on more than they can handle. And as a bonus, being approved makes a buyer appear more serious to sellers, which can be helpful in bidding wars.

You may see some lenders use other terms like prequalified and pre-approved. Pre-qualification often provides a preliminary estimate of what you can afford, but it doesn’t give you the financial backing that home sellers might be interested in seeing. By verifying some of your financial information, lenders can also offer pre-approval.

This is an initial approval of you and your finances. It isn’t a final approval that promises you a mortgage, but it can help you make a stronger offer to sellers.

2. Opt on multiple Mortgage Rate Quote

Getting a mortgage quote from a lender may seem time consuming, as it typically involves speaking with a professional and providing financial documentation. In this instance, relying on the first quote you get may be time efficient but not cost efficient.

Another lender could offer a deal that will save you money over the lifetime of the loan, so getting multiple quotes is the best way for buyers to choose the right lender and get a mortgage with the best possible rates and terms.

3. Invest In A Real Estate Agent

Can you buy without a real estate agent? Yes. Should you? That answer may be more complicated.

Real estate agents are experts. Although you may save some money by handling the process yourself, having a real estate expert in your corner can help ease anxiety and make the home buying process go more smoothly overall.

4. Be Mindfull About Your Affordability

Although an initial mortgage approval estimates how much house you can afford, this amount isn’t always going to fit within your budget since there’s often a difference between your debt-to-income ratio (DTI) and your monthly expenses as a whole.

“How To Avoid Mistakes As A First Time Home Buyer ?”. When a lender reviews your financial information for approval, they rely on your DTI to determine how much of your monthly income is going toward debt bills. But DTI doesn’t account for all your expenses, and costs like groceries, utilities and health insurance can quickly add up. Therefore, buying a home worth your entire approved mortgage amount may make it difficult for you to afford other monthly payments.

Be sure to consider any monthly expenses that may have been unaccounted for in the initial approval process. In addition to your current budget, extra costs that will come with being a homeowner, including closing costs, maintenance and the potential for increased utility costs.

5.Keep An Eye on Your Credit Report

Ignoring or not observing your credit score throughout the home buying process can lead to unchecked errors that could impact your loan approval or lead to less favourable loan rates and terms.

Although your credit is pulled during the lender’s initial approval, lenders will recheck it just before the scheduled closing day, and changes in the credit report could mean changes to your loan. For example, suppose you apply for new credit cards or fail to make payments on existing credit cards before closing. In that case, your credit score could drop significantly, making it difficult to qualify for financing.

6. Home Inspection Is Must To Do

A home inspection can be important for avoiding future problems within the home. While some home buyers may choose to forego inspections, especially during the bidding wars you may encounter in a seller’s market. Home inspections and the safety they provide shouldn’t be undervalued.

Home inspections protect home buyers and lenders in cases of serious issues with the home’s structure or core systems. After the home inspection, you’ll receive a report with any identified or potential issues in the home, and you can use this to negotiate repairs or a lower purchase price with the seller.

7. Spending All Of Your Savings

Buying any house is expensive. Saving for the down payment and closing costs alone can be time consuming, but it’s worth taking the extra time to save some money beyond the bare minimum of what you believe you need.

Draining your savings can put you in a troublesome position when it comes time for other hidden or unexpected maintenance costs, leaving you vulnerable in emergency situations. So, while that extra bedroom may be appealing, make sure you can afford the home and your mortgage without depleting your savings.

8. How Much Money Should You Have To Saved?

There’s a number of expenses to save for when you’re buying a house for the first time, including:

Down payment:

This is the part of the home’s purchase price that you pay upfront. In the past, it has been the gold standard to put down 20% of the purchase price in the down payment but doing this is less common today. Some loans, require as little as 0% down.

Closing costs:

These costs may include appraisal fees, title fees, lender fees, application fees, loan origination fees, property taxes, mortgage insurance and more – and the price tag for these costs can quickly add up to as much or more than your down payment. In general, you can expect to pay about 3% – 6% of the purchase price of the home in closing costs, on top of what you already paid for the down payment.

Homeowners insurance:

This insurance covers damage to your house and the assets inside it, and it is typically required by your mortgage lender. Because every insurance company uses a different formula to determine your specific premium, anticipating insurance costs can be hard. However, you can find this cost on your Closing Disclosure document, which lists your mortgage loan terms in detail.

Property taxes:

Paid monthly, these fees are based on the assessed value of your property.

Home maintenance:

Once you move into your new home, you’re bound to find a few opportunities for upgrades and improvements. Whether it’s simple home maintenance or a more involved remodel, be sure to consider these costs ahead of time.

Community fees:

Depending on the type of home and the neighbourhood, you may have to pay fees, which typically cover trash pickup, landscaping and perhaps other community amenities. These types of fees are most commonly found in planned neighbourhoods, townhouses, multi-unit apartment buildings or condominiums.

Utility bills:

While you may think you understand utility costs from your time as a renter, keep in mind that these costs vary significantly between locations, and it will cost more to light and heat a four bedroom house than a two bedroom.

Moving costs:

This one may seem simple enough, but some buyers are so focused on their new home that they forget the time, effort and money it will take to pack up their old one. Moving can be expensive, so we recommend establishing your moving plan early on so you can save for professional movers, if needed.

9. Not Making The Right Down Payment

The down payment you make on a home impacts your interest rate and the size of your monthly mortgage payments. Many believe the myth that you always need to put down 20% of the purchase price, but this isn’t typically the case ,as long as you’re willing to pay for private mortgage insurance (PMI).

PMI is a type of mortgage insurance on a conventional home loan that protects the lender if you default on your loan, and it’s typically required until you reach 20% equity in the home. If you can afford a larger down payment, it may be worth it to avoid this additional cost.

However, a 20% down payment is simply not attainable for many first time home buyers.The average down payment for a home is 6%, according to data.

10. Neglecting First-Time Home Buyer Programs

Many people don’t realize that first-time home buyer programs and grants can help you afford to buy a home. Certain states and cities provide these assistance programs, so be sure to check your local government websites to see if you qualify for additional financing. Several national programs also help low to moderate income home buyers purchase a home with as little as 0% down.

11. Ignoring Government-Backed Loans

When considering mortgages, most home buyers think of conventional financing. But other types of loans that are often overlooked may be more affordable.

You might qualify for a mortgage type you’ve never considered before. So it’s worth exploring your options and doing your research to see what’s out there.

12. Not Researching The Neighbourhood

Of course, the most important factor to consider is the house itself. But researching the neighbourhood surrounding the home can be important, too. If the neighbourhood, school district or other environmental factors are less than ideal. It might be hard to enjoy your new home.

To avoid this, you have to take the time to research the home’s neighbourhood before committing to a sale. Check school ratings and crime statistics and consider proximity to amenities like restaurants and entertainment.

13. Making Emotional Decisions

When you walk through your dream home, it’s easy to get caught up in the excitement. Around every corner is a new memory to be made. And you may already be envisioning your kids playing in the yard or splashing in the tub.

But while buying a home is certainly an emotional milestone, it’s also a personal finance one. With any financial investment, it’s important to make decisions based on fact and not emotion. Remember that this isn’t just a house, it’s likely the largest financial investment you will make in your lifetime.

14. Rushing To Make An Offer

No matter how great a home purchase seems on the surface, first time home buyers should avoid rushing into it. Remember that your offer serves as a commitment to pay if the seller accepts it. So it’s best to be 100% sure of your interest in the home before making an offer.

15. Waiting Too Long

On the flip side, taking too long to make an offer could cost you the home you really want. And waiting around for the “perfect” home could mean missing other quality options. Narrow searches typically come with narrow results. So be careful not to be so picky that you prolong the process indefinitely.

“How To Avoid Mistakes As A First Time Home Buyer ?”. Buying a home can be both exciting and stressful. With so many steps involved, it’s easy to get a little lost along the way. But when you’re making one of the biggest financial investments of your life. Small mistakes can quickly add up. If you have trusted friends or family members who have recently been through the process. Ask them what they’ve learned along the way and when in doubt, your real estate agent is there to help.